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Germany Benefits From Switzerland's Group Request Concession

by Ulrika Lomas, Tax-News.com, Brussels

15 February 2013


The German Finance Ministry has recently confirmed that German tax investigators will now have recourse to group requests to assist in tracking down German residents alleged to have undeclared and untaxed bank accounts held in Switzerland.

This follows the entry into force at the beginning of February of Switzerland’s new Tax Administrative Assistance Act (TAAA), allowing group requests for information based on a pattern of behavior rather than solely on individual cases.

In the case of group requests, the persons concerned must be identified by means of specific search criteria. So-called fishing expeditions - requests without concrete indications - remain expressly prohibited.

The Finance Ministry declined to disclose whether or not investigators have already made use of the new provisions, although it did stress that any group requests will only be admissible from the TAAA entry into force date.

Therefore, despite the collapse of the bilateral tax accord with Switzerland in the German Bundesrat, or upper house of parliament, aimed at regularizing undeclared assets, German tax evaders still run a much greater risk of being discovered.

Negotiated by German Finance Minister Wolfgang Schäuble, the proposed bilateral tax treaty between Germany and Switzerland provided for a 25% withholding tax (plus solidarity surcharge) to be imposed from 2013 on capital gains received by German taxpayers with accounts held in Switzerland, ensuring that capital gains realized in Switzerland were treated in the same way as in Germany.

The tax deal also provided for the taxation of hitherto undeclared and untaxed assets held by German taxpayers in Swiss banks, at withholding tax rates varying from 21% to 41%.

The deal was blocked in the Bundesrat by Social Democrat-led states, which argued that the provisions were too lenient.

At the end of January, the Swiss Federal Council resolved to bring the new Tax Administrative Assistance Act into force on February 1, 2013. Consequently, group requests in accordance with the international standard will now be possible as well.

Switzerland's Tax Administrative Assistance Act governs the execution of administrative assistance under double taxation agreements. Approved by parliament on September 28, 2012, the referendum deadline expired on January 17, 2013 without a referendum being called.

The existing ordinance governing the implementation of double taxation agreements was repealed when the TAAA came into force.

Group requests in accordance with the international standard are also permitted with the entry into force of the TAAA. Such requests require a description of the action taken by bank clients to avoid taxation and must be clearly distinct from fishing expeditions.

TAGS: compliance | Finance | tax | investment | double tax agreement (DTA) | tax compliance | tax avoidance | law | Organisation for Economic Co-operation and Development (OECD) | agreements | tax rates | withholding tax | Germany | Switzerland

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