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Italy Working Towards Swiss Tax Deal

by Ulrika Lomas,, Brussels

09 November 2012

At the recent G20 meeting in Mexico City, the Italian Minister of the Economy Vittorio Grilli has confirmed that Italy is working towards a tax treaty with Switzerland, possibly by the end of this year.

Discussions on a treaty commenced in May this year, with a bilateral working group being established to carry forward the negotiations. It has also, so far, involved two meetings between Swiss President Eveline Widmer-Schlumpf and Italian Prime Minister Mario Monti in June and August this year, while the Swiss Federal Council has adopted a mandate setting out the essential points on which it believes the negotiations should be based.

As now also confirmed by Grilli, the parties are talking about an agreement on the regularization of assets already held in Switzerland by non-resident taxpayers and the introduction of a withholding tax on future investment income and capital gains, such as has already been concluded with Switzerland by Germany, the United Kingdom and Austria.

It has been suggested that the additional tax revenue that would be available to Italy if it were to agree such a deal, on estimated undeclared Italian funds in Switzerland of up to EUR150bn (USD192bn), could amount to some EUR40bn up-front, with other significant funds paid annually thereafter.

The discussions have also covered the necessary modifications that would need to be made to the (previously agreed but uncompleted) double taxation agreement between the two countries, particularly with regard to the exchange of tax information so that Switzerland could be taken off the Italian 'black list', together with possible changes to the existing agreement on the taxation of Italian cross-border workers.

To date, the progress of the negotiations has been slower than expected, with the working group having been originally expected to present concrete proposals by the end of this autumn. However, it now appears that contacts are being intensified, with various meetings being planned in the short-term.

At the G20 meeting, Grilli underlined that the Italian government’s objective was to have an agreement with Switzerland based on the principle of transparency and in accordance with the international standards on tax information exchange, that were again confirmed in the latest G20 communique. He said there was no reason to think that agreement could not be reached in accordance with those principles.

TAGS: individuals | compliance | tax | double tax agreement (DTA) | tax compliance | law | banking | employees | offshore | agreements | offshore banking | banking secrecy | withholding tax | Italy | Switzerland | individual income tax

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