Automatic Exchange of and the Swiss Voluntary Tax Programme

Automatic Exchange of and the Swiss Voluntary Tax Programme
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Swiss Taxpayers And The Automatic Exchange Of Information (AEI):
The Swiss Voluntary Disclosure Programme (VD) And The Simplifed Procedure Of Tax Recovery Available To Heirs

The following important information has been provided by BRA member, Peter Steimle, whose company, Steimle & Partners Consulting Sagl, is based in Lugano. Should further information be required, his office maybe contacted by e-mail at info@steimle-consulting.ch or telephone: 091 9139900. 

The VD procedure applies to undeclared assets and income wherever located and   exempts individuals and companies from fines and criminal prosecution.  The disclosure programme is also available to heirs, with the simplified procedure for the recovery of taxes on undeclared assets and income of the testator. Both VD programs represent the only concrete opportunity for Swiss taxpayers to regularize their tax situation without incurring administrative and criminal sanctions. The many political attempts to introduce a general Swiss tax amnesty have not been successful up to now.

The new global standard for the Automatic Exchange of Information (AEI), relevant for tax purposes

The aim of the AEI standard is to effectively combat cross-border tax evasion. At the moment more than 100 countries, including Switzerland, have in principle adhered to the introduction of this new global standard.

In accordance with the Multilateral Agreement between Switzerland and the European Union, as well as agreements with a multitude of other European and non-European countries, the implementation of the AEI involved the collection of all tax relevant information as early as this year, with implementation of the factual exchange of information between the various tax authorities of the signatory countries scheduled for 2018.

For Swiss taxpayers, the Federal Tax Administration and the Cantonal authorities will obtain in the course of 2018 the first bits of information on the foreign assets and income of which Swiss residents are the owners and beneficiaries.

Once the present consultation process is over, additional AEI agreements will come into effect in January 2018 and the exchange of data from 2019 with a multitude of other signatory countries such as the Principality of Monaco, the British Virgin Islands, Bermuda, Antigua, Belize, the Principality of Lichtenstein, the UAE and others. It is very likely that in 2018/19 Switzerland will conclude AEI agreements with Hong Kong, Singapore and the Bahamas.

For Swiss taxpayers who have banking relationships in AEI convention countries or are beneficiaries of financial entities such as domiciliary companies, operating entities, trusts and foundations established abroad with assets in financial institutions based in a foreign state that is a signatory to the AEI, the Swiss tax authorities will obtain from that state all the tax relevant information.

Briefly, such information applies to:

  • elements regarding the identification of the banking relationship
  • personal details of the holder of the banking relationship or of the person who appears to be the beneficial owner or the person who exercises control on what is then considered to be an entity
  • tax identification data of the beneficial owner or the person who ‘controls’ the entity;
  • income from capital
  • Balances of financial accounts, proceeds from the sale of financial assets or income from certain insurance contracts.

How the VD program will exempt individuals (and companies) from penalties and how it is a unique tool for tax regularization:

 Considering the above, the VD procedure exempts individuals from fines and criminal prosecution, even when applied conceptually to the heirs. It thus becomes an essential and unique instrument to regularize what has been evaded by the taxpayer or respectively by the testator.

It is worth remembering that in the case of tax evasion, of which the Swiss authorities become aware (therefore not applying the VD programme), in addition to the recovery of income and wealth taxes for a maximum period of 10 years and default interests which are calculated according to the interest rate in force at the relevant tax period, there is a fine that is the equivalent of 100% of the tax evaded (reduced to a third in the case of slight fault), that can be increased three times in the case of severe offence.

Conditions and assumptions for operating successfully the VD with exemption from penalties: (see Ticino tax code articles 258, 265a, 269).