How to handle exchange of information requests from tax authorities

With tax authorities sharing more cross-border data than ever before, taxpayers must take a careful, proactive and strategic approach when responding to information requests, writes Danielle Cunniffee

The digital age has transformed the global economy, making cross-border transactions more common and facilitating the rapid expansion of cross‑border information sharing between tax authorities.

Exchange of information (EOI)—comprising automatic, spontaneous and on‑request data sharing between countries—is a central feature of this global tax-transparent environment.

As transparency standards strengthen, taxpayers must recognise that information supplied to one tax authority is increasingly likely to be shared widely.

In 2024, for example, the Revenue Commissioners in Ireland (Revenue) automatically exchanged financial account information with 116 jurisdictions, and the scope of information shared continues to expand—crypto assets are now included, for example.

This large volume of information can be leveraged easily by tax authorities to flag anomalies, generate risk scores and prompt swift, targeted taxpayer enquiries or assessments.

Since most EOI is routine and automatic, we will focus here on EOI on request, which is used by tax authorities triangulating information to use as substantiate evidence in an investigation.

Why EOI really matters

EOI on request is a powerful tool at the disposal of tax authorities. As well as assisting in the obtaining of information, it can also extend the statute of limitations for tax audits and reassessments in certain jurisdictions.

If the requested information isn’t already in the domestic authority’s possession, it may need to be obtained from the taxpayer. In such cases, taxpayers could contest the request or provide additional information voluntarily to clarify the situation.

For any organisation, an EOI request should be regarded as a potential warning sign, escalated to management and thoroughly reviewed.

EOI on request: legal basis

Tax authorities can seek EOI on request under various legal frameworks, such as the EU Directive 2011/16/EU (DAC) (as amended), double taxation agreements, or the Multilateral Convention on Mutual Administrative Assistance in Tax Matters.

Each legal basis for EOI has a different scope as well as different conditions and procedures. It is critical to understand the legal basis for the request being made, as there are a number of core principles that underpin any EOI on request.

If an EOI request is received, the legal basis should be interrogated and the request measured against the core principles, examples of which are set out below, to determine if resistance or scope limitation is justified.

1. Reciprocity

Authorities may only request information they could legally obtain domestically.

2. Confidentiality

Exchanged information must remain confidential and receive equivalent protection to domestic tax data.

3. Foreseeable relevance

Requests must not be fishing expeditions. In Berlioz Investment Fund SA v Directeur de l’administration des contributions directes, the Court of Justice of the European Union confirmed that the requested authority must verify foreseeable relevance before responding.

Additionally, requesting authorities must exhaust domestic information sources first unless doing so would be unreasonably burdensome.

Peer review and compliance

Member countries of the Organisation for Economic Co-operation and Development have committed to sharing information, which undergoes peer review.

Because of this peer review requirement, tax authorities could become more focused on complying with the EOI request than on carefully considering if the information should, in fact, be shared.

It is therefore important that taxpayers understand the grounds on which they can refuse to provide information to Revenue if requested.

Key takeaway

Always ensure any information provided to tax authorities is accurate, complete and capable of withstanding scrutiny in multiple jurisdictions.

Given the complexity and potential consequences of cross-border information sharing, taxpayers should take a proactive, strategic approach when preparing their data and when responding to information requests from tax authorities.

Danielle Cuniffee is Tax Partner at PwC Ireland