Amid concerns, OECD suggests digital register to record estate ownership

Amid concerns over investments in foreign real estate being used to "shelter undeclared assets", the OECD has suggested automatic exchange of information among countries and setting up of digitalised ownership registers accessible to designated relevant government agencies on a real-time basis.

The 'Enhancing International Tax Transparency on Real Estate' report released by the Paris-based Organisation of Economic Cooperation and Development (OECD) ahead of the G20 Summit, said there have been significant increase in foreign-owned real estate assets over the past decade, and a lot of funds have been shifted from financial assets to buying foreign real assets to avoid tax compliance.

 

"While tax administrations often only have limited visibility over the cross-border ownership of (and income from) real estate, there are indications that the proportion of real estate owned by non-residents has continued to increase in recent years... information exchanged under the CRS can also provide indirect indications to tax administrations about foreign real estate ownership or transactions," the report said.

Stating that trends underline the tax compliance risks associated with cross-border ownership of real estate and strengthen the case for enhancing tax transparency in this area.

The report suggests that, in the short-term, interested countries could make significant progress at limited cost by exchanging information that is readily available on the basis of existing international legal and operational gateways for the exchange of information.

The report also suggests two models for longer-term structural improvements to tax transparency.

The first is based on the traditional exchange of information approach, underpinned by common due diligence and reporting rules.

"The second is based on a more novel direct access-based model, building on the ongoing trend, in particular in the anti-money laundering and financial regulatory space, towards the inter-connection of digitalised ownership registers accessible to designated relevant government agencies on a real-time basis," it added.

The Indian G20 Presidency invited the OECD to prepare a report that looks into the current level of tax transparency on foreign-owned real estate.

Developing a multilateral competent authority agreement for countries wishing to participate, based on the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAAC), to agree on the modalities of the exchanges was also one of the suggestions.

It suggested definition of a common set of minimum information to be included in the domestic registers, taking into account the needs of various stakeholders, a common IT-architecture for the interconnection of the register through a single query portal and an approach on which agencies can get access, the purpose for which they can get access, and confidentiality requirements, etc.

The OECD stands ready to support further work towards enhancing tax transparency on real estate, including under the current Indian and upcoming Brazilian Presidencies of the G20, the report added.