OECD and G20 Launch Initiative to Enhance Real Estate Tax Transparency

The Organization for Economic Cooperation and Development (OECD) and the Group of 20 (G20) have introduced the Information on Immovable Property (IPI) Agreement, aimed at increasing transparency regarding untaxed funds in real estate. This initiative seeks to expose untaxed investments, rental income, and capital gains from real estate by facilitating the exchange of ownership information between tax authorities in different jurisdictions. The goal is to close loopholes that allow real estate to serve as a hiding place for unreported income.

The Jerusalem Post

The IPI Agreement consists of two main modules. The first module focuses on providing visibility into immovable property assets held abroad by taxpayers, involving a one-time automatic exchange of existing property holdings and subsequent annual exchanges for new acquisitions. The second module will facilitate regular exchanges of information regarding income derived from immovable property, including annual updates on disposals and rental income. The exchanged data will include details such as the owner's name, tax identification number, property address, acquisition prices, and annual income.

The Jerusalem Post

Countries that sign the IPI Agreement will be part of the 152 jurisdictions already covered by the Convention on Mutual Administrative Assistance in Tax Matters, which includes Israel. This framework allows for the adoption of the IPI Agreement with minimal legislative hurdles, as tax authorities can agree to the terms and notify the OECD Secretariat without extensive parliamentary approval. The agreement is set to take effect on January 31 following a jurisdiction's sign-up, with information exchanges scheduled annually by June 30.

The Jerusalem Post

The initiative has garnered interest from various countries, with the UK’s His Majesty’s Revenue and Customs (HMRC) emphasizing the importance of broad adoption to enhance tax compliance and combat evasion. Countries such as Belgium, Brazil, France, Germany, and South Africa have expressed their commitment to the IPI Agreement, reflecting a collective effort to address tax evasion through improved transparency in real estate investments.

The Jerusalem Post

While the IPI Agreement aims to enhance tax compliance, there are concerns regarding the potential for it to operate as a "backdoor law," bypassing democratic processes for approval. Critics question whether the implementation will be adequately scrutinized and whether it will lead to the surfacing of past and present investments. The timeline for full implementation may extend over two to three years, raising questions about the effectiveness of the initiative in the short term.

The Jerusalem Post

As jurisdictions begin to sign the IPI Agreement, stakeholders are advised to prepare for the implications of increased scrutiny on real estate investments. The OECD and G20 will continue to monitor the adoption process, with further developments expected as countries finalize their participation.

The Jerusalem Post

• “The broad adoption of the IPI MCAA… will strengthen our ability to monitor and enforce tax compliance, and to combat tax evasion.” — His Majesty’s Revenue and Customs (HMRC)

The Jerusalem Post