OECD welcomes international agreement to boost offshore real estate transparency

Last Thursday (4 December), 26 countries agreed to implement a new international framework to exchange information on offshore real estate, the Organisation for Economic Co-operation and Development (OECD) announced.

The OECD called the framework a “significant expansion” of global tax transparency, which would extend automatic reporting beyond financial accounts and crypto and into real estate holdings, transactions and income.

“This pledge by 26 jurisdictions marks a major step forward in our collective efforts to tackle tax evasion and promote greater transparency in global taxation,” Manal Corwin, director of the OECD Centre for Tax Policy and Administration, said.

“By extending automatic exchange to real estate, jurisdictions are helping to shed light on an area that has historically been opaque and difficult for tax authorities to monitor across borders.”

The OECD said that the new framework, known as the ‘Multilateral Competent Authority Agreement on the Exchange of Readily Available Information on Immovable Property (IPI MCAA)’, aimed to close gaps in cross-border tax reporting concerning property assets.

The framework relied on existing architecture for automatic information exchange between jurisdictions, previously used for information on financial accounts, crypto assets and digital platform transactions.

The 26 participating jurisdictions spanned Europe, Asia, Oceania, Africa and South America, but did not include Australia. The OECD said it would welcome other jurisdictions’ participation in the framework.

The framework acknowledged that barriers to cross-border exchanges of tax information had been significantly reduced over the past 15 years, largely due to tax policy developments. While these developments had significantly boosted transparency regarding financial assets, the OECD noted that improvements in tax transparency surrounding real estate lagged.

“Tax administrations often only have limited visibility over the cross-border ownership of (and income from) immovable property,” the framework’s introduction read.

“At the same time, the 2023 [OECD] Report references studies suggesting that cross-border holdings of immovable property have continued to increase in recent years and are frequently underreported.”

The OECD said cross-border immovable property was being used to shelter undeclared assets that would otherwise have been subject to international reporting initiatives.

In a joint statement, the participating jurisdictions said that the mechanism would bring non-financial reporting closer in line with financial reporting transparency standards and help combat tax evasion.

“The broad adoption of the IPI MCAA is an important step towards delivering tax transparency on non-financial assets,” the statement read.

“It will strengthen our ability to monitor and enforce tax compliance, and to combat tax evasion, which undermines public revenues and unfairly shifts the tax burden onto compliant taxpayers.”