Many countries, including Switzerland since 1 January 2017, have adopted the global standard for the automatic exchange of financial account information (AEOI). The implementation of this international standard has led to a large number of voluntary tax disclosures by Swiss taxpayers.
Switzerland now automatically exchanges with 38 States, including EU States and other countries such as Australia, Japan, Canada, Norway, South Korea and offshore jurisdictions such as the State of Guernsey, Isle of Man, Cayman Islands, Jersey and Bermuda.
In December 2017, Parliament adopted the federal decrees concerning the introduction of the AEOI with further partner States starting in 2018- 2019.
Switzerland will thus receive information from foreign countries on taxpayers domiciled in Switzerland whom have bank accounts in said countries. Similarly, Switzerland will send information to foreign tax authorities on taxpayers domiciled abroad whom have bank accounts in Switzerland, if there is an agreement with the relevant countries.
30 September 2018 deadline
On 15 September 2017, the Federal Tax Administration (FTA) took a position on voluntary non-punishable disclosures in connection with financial accounts impacted by the automatic exchange of information. According to this position paper, taxpayers with undeclared assets in states with which the AEOI agreement entered into force in 2017 will have until 30 September 2018 to declare these tax elements.
This statement resolves the question of the “spontaneous” nature of the regularization process. The FTA considers that the tax elements subject to the AEOI will be known by 30 September 2018 at the latest, so a disclosure can no longer be considered as spontaneous as of this deadline.
We remind you that in case of possession of movable assets (bank accounts, etc.) or real estate not declared, the disclosure allows taxpayers to put their affairs in a compliant with the tax authorities by disclosing the same spontaneously. If this is the first voluntary disclosure and all the conditions are met, no fines will be due. The tax authorities will nevertheless make a tax catch-up for the non-prescribed period with default interest.
The FTA thus considers that the cantonal authorities will know the tax elements covered by the AEOI by 30 September 2018 at the latest, so that the disclosure can no longer be considered spontaneous as of this deadline. It is necessary to further specify that, if the FTA receives information relating to a taxpayer before 30 September 2018, it will be the responsibility of the FTA to judge whether the disclosure was indeed spontaneous or whether the taxpayer denounced himself because he knew that the tax authority already had knowledge of the tax elements concerned.
In this context, we can doubt that by the end of September 2018 all countries concerned by the automatic exchange of information will have transmitted all the necessary data in due time.
Similarly, the accuracy and relevance of the information provided by the foreign tax authorities will also have to be verified, so it is in fact very unlikely that the exchange of information should actually take place in practice before 30 September 2018.
Despite this, the cantonal tax authorities in French-speaking Switzerland have now accepted and will be applying the FTA’s position.
It would therefore be hazardous not to respect the 30 September 2018 deadline to regularize one’s tax situation with the Swiss tax authorities, so there are only a few months left!
New practice followed by the banks
We would also add that in this context of automatic information exchange, a new banking practice seems to have recently been put in place. The major Swiss commercial and private banks are concerned.
The new practice would apply to certain Swiss tax resident clients, depending on certain risk factors, for example those who are the beneficial owners of an offshore structure or trust.
These clients must now provide the bank with an extract of their tax return or confirmation from a tax advisor that their income and/or assets have been correctly declared.
If the account holder is unable to provide adequate proof, the account may be closed or blocked. The various tax amnesty projects no longer seem to be able to win a political majority. Accordingly, Swiss taxpayers must review their tax situation in a complete and coherent manner.