Automatic Exchange of Information

The increasing integration of the global financial system has expanded taxpayers’ ability to hold assets and structure assets across jurisdictions. At the same time, it has exposed the structural limitations of traditional exchange of information mechanisms, which rely heavily on an exchange of information on request  under tax treaties and Tax Information Exchange Agreements (TIEAs). In practice, such mechanisms depend on the prior identification of risks, making them less effective in detecting undisclosed offshore assets.

Against this backdrop, the Automatic Exchange of Information (AEoI) has emerged as a more structured approach to cross-border tax transparency. By enabling the automatic and periodic exchange of financial account information, AEoI significantly broadens the scope of data available to tax authorities without requiring jurisdiction-specific requests. However, its effectiveness ultimately depends on how such data is processed, analysed and utilized within domestic compliance frameworks.

Framework

AEoI is implemented based on the Common Reporting Standard (CRS) developed by the Organization for Economic Co-operation and Development (OECD). Under CRS, financial institutions are required to conduct due diligence procedures to identify the tax residency of account holders and report relevant financial account information to their domestic tax authorities.

The information exchanged typically includes account holder identification details, account numbers, the identity of the reporting financial institution, account balances or values, and income generated from financial assets, such as interest, dividends, and other investment income. This standardized reporting framework ensures that information exchange is systematic and consistent across participating jurisdictions, rather than ad hoc.

Broader Transparency Landscape

AEoI operates within a broader international tax transparency ecosystem. While  the Foreign Account Tax Compliance Act (FATCA) requires financial institutions to report accounts held by U.S. taxpayers., the CRS establishes a multilateral system in which participating countries automatically exchange financial account information with one another on a reciprocal basis.

In parallel, initiatives under the Base Erosion and Profit Shifting (BEPS) project, particularly Country-by-Country Reporting (CbCR), require multinational enterprise groups to disclose the allocation of income, taxes, and economic activity across jurisdictions.

More recent developments, including the Crypto-Asset Reporting Framework (CARF) and the GloBE Information Return (GIR) under Pillar Two, further reflect the continued expansion of transparency standards in response to evolving financial instruments and business models, albeit at varying stages of global implementation

Implementation in Indonesia

Indonesia has implemented AEoI since 2018 as part of its commitment to international transparency standards. The implementation is supported by Law No. 9 of 2017, which authorizes tax authorities to access financial information for tax purposes.

Technical provisions are set out in Ministry of Finance Regulation No. 70/PMK.03/2017, as most recently amended by Regulation No. 108 of 2025, governing the reporting obligations of financial institutions. In practice, financial institutions identify reportable accounts in accordance with CRS and submit the relevant information to the Directorate General of Taxes (DGT) for exchange with partner jurisdictions.

Indonesia is also a signatory to the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, facilitated by the OECD and the Council of Europe, which provides the legal basis for expanding international cooperation in tax matters.

As of January 2026, based on Directorate General of Taxes Announcement No. PENG-1/PJ/2026, Indonesia is connected to 117 participating jurisdictions, reflecting the continued expansion of its AEoI network.

Compliance Monitoring

From a tax administration perspective, AEoI data forms part of a data-driven compliance framework. Information received from partner jurisdictions is used to assess the consistency between taxpayers’ offshore financial positions and their disclosures in annual tax returns.

This includes foreign-sourced income, offshore assets, and cross-border related-party transactions. In this context, AEoI serves as a key input for risk assessment, compliance profiling and further supervisory actions.

However, while AEoI significantly enhances data availability, it does not automatically translate into enforcement outcomes. Its effectiveness depends on the quality and completeness of reported information, as well as the institutional capacity of tax authorities to analyze and act upon such data.

Conclusion

AEoI introduces a more structured framework for the automatic exchange of financial account information, reducing reliance on request-based mechanisms and expanding the availability of cross-border financial data. In Indonesia, its implementation supports a more systematic approach to compliance monitoring, particularly in assessing the consistency of offshore income, asset ownership, and cross-border transactions reported by taxpayers.

At the same time, the effectiveness of AEoI ultimately depends on consistent implementation across jurisdictions and the ability of tax authorities to convert data into actionable insights. As transparency standards continue to evolve, the role of AEoI will increasingly be defined not only by access to information, but by the reliability of data and the sophistication of its used within modern tax administration system. (Shintya)