OECD proposes real-time data sharing to combat offshore real estate tax evasion

Real estate assets concealed in offshore holdings may face increased scrutiny as part of a global effort to combat tax evasion and money laundering through real-time data sharing among national authorities. The Organisation for Economic Cooperation and Development (OECD) presented proposals to G20 leaders at the New Delhi summit, responding to a request from the Indian presidency. The OECD's report emphasizes the growing trend of cross-border property holdings and outlines short- and long-term models for enhancing tax transparency on foreign real estate assets.

The OECD's recommendations encompass both traditional and innovative approaches. The traditional model involves data sharing, while the novel "direct access-based model" relies on interconnected digital ownership registers accessible in real-time to designated government agencies. This digital infrastructure would facilitate seamless connectivity between national registers, incorporating a unified query portal. To ensure proper implementation, the framework would require specific access modalities, defined access purposes, confidentiality standards, and possibly international legal instruments or treaties to govern cross-border interconnection and access to registers.

Once implemented, this framework would advance the global system of information sharing, which currently primarily focuses on financial holdings. Experts believe that the shift in investor preference from financial assets to real estate over the past decade is partly attributed to the automatic exchange of financial information among nations. The proposed model for tax transparency regarding real estate assets is seen as a crucial tool for ensuring tax compliance.

The OECD report highlights that tax authorities often lack visibility into their residents' foreign real estate holdings. With the availability of data, tax authorities could cross-reference tax return declarations with real estate holdings, identifying any inconsistencies that might warrant further investigation. Real-time information retrieval would empower tax authorities to access data when needed, eliminating the need to wait for periodic exchanges of information.

It's important to note that investor behaviour in response to this real-time information-sharing system will vary depending on the specifics of the system, the level of transparency in each country, and how well investors adapt to the evolving regulatory landscape.

In summary, the implementation of the OECD's recommendations marks a significant step toward greater accountability and compliance among investors holding offshore real estate assets. While this initiative enhances transparency and tax compliance, it may also make investors more cautious about failing to disclose offshore real estate assets or income, reflecting a broader global effort to combat tax evasion and money laundering.

Next (RBI mandates release of property documents within 30 days post-loan repayment)

OECD proposes real-time data sharing to combat offshore real estate tax evasion

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