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Switzerland and EU sign agreement on automatic information exchange

2015-07-24 17:00
Tax news

27 May 2015, the European Union and Switzerland signed a bilateral agreement on the automatic exchange of financial information that commits both parties to collect information on banking accounts starting in 2017 and to exchange this data from 2018. The new agreement is fully in line with the strengthened transparency requirements that EU Member States agreed last year. It is also consistent with the OECD’s Common Reporting Standard (CRS) for the automatic exchange of information.

Under the agreement, EU Member States will receive, on an annual basis, the names, addresses, tax identification numbers and dates of birth of their residents with accounts in Switzerland, as well as other financial and account balance information. This information can currently only be accessed upon request.

The new agreement will replace the current agreement on the taxation of savings that entered into force in 2005. Under the current agreement, Switzerland is required to remit to the EU countries 75% of the taxes withheld on interest on savings of EU resident individuals. Alternatively, the client can request the bank to report the interest income to the client’s home country tax authority.

The current agreement exempts intercompany payments of dividends, interest and royalties from any withholding tax in the source state. This withholding tax exemption has been adopted in the new agreement without any changes, such that dividend, interest and royalty payments from EU member states to Switzerland and vice versa will continue to be exempt from withholding taxation in the source state if the respective requirements are met.

The existing withholding tax agreements that Switzerland signed with Austria and the UK and which entered into force on 1 January 2013 will also be terminated. Switzerland intends to agree with Austria and the UK on how to terminate those agreements and to ensure a smooth transition to the new CRS.

Pierre Moscovici, European Commissioner for Economic and Financial Affairs, Taxation and Customs, said: "Today's agreement heralds a new era of tax transparency and cooperation between the EU and Switzerland. It is another blow against tax evaders, and another leap towards fairer taxation in Europe. The EU led the way on the automatic exchange of information, in the hope that our international partners would follow.”

Switzerland first committed itself to incorporating the OECD CRS by signing a declaration at the OECD’s annual Ministerial Council meeting in May 2014. Since that time approximately 100 countries, including all major financial centres, have committed to introducing the CRS. It is the intention of Switzerland to reach agreements for the implementation of the CRS with countries outside the EU, including the US. A first agreement has been signed with Australia.

The Swiss Federal Council has already opened a consultation procedure on the new agreement, providing interested parties, including the cantons, the opportunity to comment until 17 September. The agreement will then be submitted to Parliament for approval. Approval is subject to an optional public referendum.

The European Commission is currently concluding negotiations for similar agreements with Andorra, Liechtenstein, Monaco and San Marino. It expects that these will be signed before the end of the year.

 

 

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