In the jungle of the exchange of information

Christoph Rechsteiner | Kerstin Beck

 

On 27 May 2015, the Federal Council initiated the consultation process regarding the agreement with the EU for the automatic exchange of information in tax matters. It factually replaces the existing ’taxation of savings agreement with the EU (TSA) of 2005 and mainly covers the following three elements:

  • It defines which banks and financial institutes have to provide annually and automatically information regarding the identity and account details of the taxpayer to the responsible authority of its country of residence;
  • It regulates the exchange of information based upon request of a country; and
  • It contains terms regarding exemption from withholding tax on interests, dividends and royalties between related companies (analogous to today’s art. 15 TSA).

The agreement on the automatic exchange of information (AEOI) is to become effective in 2017; resulting hereof, the data will be collected from 2017 and firstly exchanged in 2018.

The AEOI must not to be confused with the ‘OECD/Council of Europe Convention on Mutual Administrative Assistance in Tax Matters. The Convention was already signed in 2013 by the Federal Council and the necessary changes and amendments to the national legislation were presented to the Swiss parliament at the beginning of this year. The key element of this convention is the spontaneous exchange of information between tax authorities. This means that the Swiss tax authorities (not the banks and financial institutes as defined in the AEOI) are obliged to inform the foreign tax authorities in cases where tax evasion, tax savings or artificial transfer of profits within group companies is to be assumed. In such cases existing rulings will be forwarded by the Swiss tax authorities. However, only information that is already available to the tax authorities or is being ‘discovered’ during a tax audit will be reported spontaneously.

In case no information is reported, neither spontaneously nor automatically the foreign state can still request the information needed. This request could legally be based on the Convention, the AEOI agreement or on a applicable double taxation agreement provided the legal requirements are met. If the relevant piece of information is not already in the files of the authorities, they will have to take all reasonable measures to retrieve the information from information holders like trustees, banks, etc. or from the affected person him- or herself. The tax authorities are allowed to make use of compulsory measures and could even charge the person concerned or the information holder for any expenses incurred.

Information though is not only to be exchanged based upon the double taxation agreement, the Convention or the AEOI. Also the anti-fraud agreement or the treaties on mutual assistance in criminal matters (e.g. indirectly via money laundry elements) signed by Switzerland can be relied on when requesting information.

Hence, there will soon be full transparency in tax matters. Structures should thus be open and arranged upon economic criteria. This does not exclude tax optimization; however, the latter cannot rely on the assumption that a country does not know what is happening outside its borders.

 

 

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