The agreement represents an important step in ongoing efforts to clamp down on tax fraud and tax evasion. It upgrades a 2004 agreement that ensured that Liechtenstein applied measures equivalent to those in an EU directive on the taxation of savings income in the form of interest payments. 

Under the agreement, the EU and Liechtenstein will automatically exchange information on the financial accounts of each other's residents, starting in 2017 for information collected in 2016. The aim is to address situations where a taxpayer seeks to hide capital representing income or assets for which tax has not been paid. [...]

The agreement ensures that Liechtenstein applies strengthened measures that are equivalent to the EU legal framework in the field of automatic exchange of financial account information, as upgraded in December 2014. It also complies with the automatic exchange of financial account information promoted by a 2014 OECD global standard. The EU and Switzerland signed a similar agreement on 27 May 2015. 

The agreement includes provisions intended to limit the opportunities for taxpayers to avoid being reported to the tax authorities by shifting assets or investing in products that are outside the scope of the agreement. Information to be exchanged concerns not only income such as interest and dividends, but also account balances and proceeds from the sale of financial assets. 

Tax administrations in the member states and in Liechtenstein will be able to: 

• identify correctly and unequivocally the taxpayers concerned;
• administer and enforce their tax laws in cross-border situations;
• assess the likelihood of tax evasion being perpetrated;
• avoid unnecessary further investigations.

The EU and Liechtenstein must now conclude the agreement in time to enable entry into force on 1 January 2016. [...]