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Switzerland’s President and Finance Minister Eveline Widmer-Schlumpf has recently conducted a working visit to Austria, with the talks focussing on the bilateral withholding tax agreement between the two countries, aimed at resolving the issue of the undeclared and untaxed assets of Austrians held in Swiss banks.
During the course of the visit, Widmer-Schlumpf held meetings with Austrian President Heinz Fischer, with Austrian Chancellor Werner Faymann and with Austrian Finance Minister Maria Fekter.
Widmer-Schlumpf underlined her confidence that the timeframe for implementation of the agreement would be maintained and insisted that from the Swiss side, there are no “constitutional objections” to the text. The minister therefore expected the agreement to enter into force as planned on January 1, 2013.
Exercising caution, Austria’s President Fischer underscored the need to first carefully examine the tax accord in detail, while noting that as far as he could see, there are no “negative aspects” of the text.
Based on the tax treaties concluded between Switzerland and the UK and Switzerland and Germany, the Swiss-Austrian tax deal signed in April provides similarly for a withholding tax levied on old money held by Austrian residents in Switzerland to regularize the accounts. The agreement also contains plans to impose an annual withholding tax on future investment income.
The differences concern primarily the applicable tax rates. The rate for the flat-rate one-off payment for regularizing the past is between 15% and 38%, depending on the duration of the banking relationship and the amount of assets concerned.
A single rate of 25% applies for the taxation of future investment income, corresponding to Austria's capital gains tax.
Switzerland and Austria have also agreed to eliminate important obstacles for cross-border financial services and to ease the conditions for banking licences in Austria. The distribution of securities funds will also be simplified.
Passing the first important hurdle, the Swiss Committee for Economic Affairs and Taxation (CEAT) in the Council of States, upper house of parliament, recently voted in favour of the withholding tax agreements with Germany, the UK, and Austria.
Only the Swiss People’s Party (SVP) voted against the plans, arguing that Switzerland had granted too many concessions during the course of the negotiations.
The Committee also backed the international withholding tax law, implementing and enforcing the agreements in Switzerland, albeit under the proviso that provisions are anchored in the law to ensure that foreign tax authorities are not able to carry out investigations in Switzerland. This law was approved unanimously.
Ahead of the vote, and a decisive factor in its outcome, the Committee sought advice from representatives of the Confederation’s banking sector, which gave their backing to the agreements, which will provide better market access in the treaty partner states.
Switzerland's National Council (lower house) and Council of States are due to vote on the agreements and the international withholding tax law in the summer session. Although approval of the treaties in the Council of States is now expected, the agreements nevertheless require parliamentary approval in the treaty partner states.
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