UK And Switzerland Sign Tax Declaration

by Robert Lee, Tax-News.com, London

27 October 2010

Swiss Finance Minister Hans-Rudolf Merz and UK Chancellor of the Exchequer, George Osborne have agreed to begin negotiations towards an agreement that will see undeclared accounts held by Britons in Switzerland taxed and more information with regards tax and banking information shared between the two states.

Following a meeting between the two ministers in London on Monday (October 25), a declaration was signed by Merz and UK Exchequer Secretary to the Treasury David Gauke for the initiation of negotiations concerning tax issues between Switzerland and the UK. The agreement will, among other things, expand cross-border cooperation in tax matters and improve market access for banks. Negotiations are expected to commence at the beginning of 2011.

According to a statement released by the Swiss Federal Department of Finance, the two countries "are confident that the negotiations will lead to a fair and lasting solution in the interests of both states."

"Both sides agree that a new solution would enable distortions to competition in terms of tax issues to be avoided," the statement adds. "UK taxpayers should not be deterred from holding a bank account in Switzerland. In future, however, the possible risk of tax evasion should not impact on the investment decisions of UK taxpayers."

The statement assures that the protection of bank client privacy "will be respected" and that the automatic exchange of information "will no longer be an issue in relations between the two states."

The agreement will seek to ensure that existing assets held by Britons in Switzerland which are "untaxed" should be "regularized" and that future investments should be covered by a withholding tax, the rate of which will be determined during the negotiations.

The agreement will also contain enhanced administrative assistance provisions in an attempt to prevent avoidance of the withholding tax. This will mean that UK authorities may submit a request for administrative assistance which states the name of the client, "but not necessarily the name of the bank." The number of requests will be limited and must be "well founded," according to the Swiss statement. 'Fishing expeditions' will not be permitted under the agreement.

A similar agreement between Germany and Switzerland, whereby German deposits in Swiss accounts will be subject to a withholding tax, possibly as high as 35%, is also under negotiation. These negotiations on revisions to the existing German-Swiss double tax avoidance agreement could be completed by the end of the month.

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