India-Marshall Islands tax information exchange agreement enters into effect

by Prabhakar K S, Shree Tax Chambers, Bengaluru, Karnataka, India

On 21 May, India announced that a tax information exchange agreement (TIEA) with the Marshall Islands, a central Pacific Ocean country, has entered into effect.
The TIEA was signed by India and Marshall Islands government officials on 18 March, in Majuro, the Republic of the Marshall Islands. The agreement has effect from 6 December 2018.

A TIEA is a mutual agreement between countries that is a tax treaty variant specifically entered into by governments to exchange information relevant to the administration and enforcement of the domestic tax laws of the contracting parties.
This information generally relates to the determination, assessment, and collection of taxes; the recovery and enforcement of tax claims; and investigations, including prosecutions.

The information is exchanged in accordance with the provisions of the TIEA arrangement

The agreement and relevant provisions are outlined in 12 articles. Article 1 deals with the object and scope of the agreement. Article 2 addresses jurisdictional aspects. Article 3 states that taxes subject to the agreement are of every kind and description imposed by both the governments, including its sub-divisions, local authorities, and political sub-divisions. Article 4 defines key terms. Article 5 addresses the exchange of information upon request. Article 6 provides for interviewing individuals and examining records with the prior written consent of the concerned parties. Article 7 addresses procedural aspects to decline such requests for exchange of information. Article 8 covers implementation. Article 9 discusses the mutual agreement procedure. Article 10 covers enforcement of the agreement. Article 11 addresses confidentiality and, last one, Article 12, deals with termination of the agreement.

The key purpose of this arraignment is to promote international cooperation in tax matters by exchanging tax related information. The OECD is the original proponent of TIEAs. They were developed by its Global Forum Working Group on Effective Exchange of Information to address harmful tax practices.

However, TIEAs are not binding instruments and can be terminated as stipulated in the agreements.

As of May 2019 India, has entered into 21 TIEA arrangements with following countries: Argentina, Bahamas, Bahrain, Belize, Bermuda, British Virgin Islands, Cayman Islands, Gibraltar, Guernsey, San Mario, Isle of Man, Jersey, Liberia, Macao Sar, Maldives, Liechtenstein, Monaco, Saint Kitts and Nevis, and Seychelles.
Very recently. India and Brunei Darussalam, a Southeast Asian country signed a TIEA.

— Prabhakar K S is Proprietor of  Shree Tax Chambers, Bengaluru, Karnataka, India.