Swiss Banks Will Maintain Their Confidentiality

August 11, 2011 International Tax CooperationOffshore BankingTaxation in GermanyTaxation in Switzerland

12 FrancsSwitzerland is set to step into a new era for its finance industry, as German and Swiss tax authorities come to an agreement in their long running dispute regarding cross border tax evasion and bank secrecy.

Swiss banks will soon shell out CHF 2 billion (EUR 1.9 billion) to Germany to cover lost tax revenues resultant from German taxpayers hiding their assets in Swiss bank accounts. The payment comes as a part of a deal reached between German and Swiss tax authorities aiming to put an end to the occurrence of German nationals using the Swiss banking system to hide their assets and capital, and evade their tax obligations.

The details of the final draft of the new agreement were jointly announced by the German and Swiss tax authorities on August 10th, and the agreement is expected to be officially signed by representatives from both governments within a few weeks. After the agreement is enacted, German taxpayers with Swiss bank accounts will be charged a 26.375 percent withholding tax on all investment incomes and capital gains arising from the account. The tax will be paid by the Swiss bank to German tax authorities anonymously and without disclosing details of the taxpayer. The new procedures will allow Swiss banks to maintain their reputed levels of banking confidentiality. Additionally the new agreement will allow account holders to settle already incurred tax obligations on their existing accounts by paying an penalty on their unpaid taxes. The penalty will vary from 19 percent to 24 percent, with the rate based on how long the account has been open for, with the earliest assessment period currently being set at the year 2000.

To further ensure that in the future the Swiss banking system is not used to hide assets and capital, and evade tax obligations by German taxpayers, the new agreement allows German tax authorities to request bank data on German taxpayers. The inquiries must contain the alleged evader’s name, but not necessarily the name of the bank. To stop the occurrence of “fishing expeditions” by German tax authorities, the number of requests is limited to 999 per year.

Photo by [Jim]