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London Invokes Clause To Improve Swiss Tax Deal

by Ulrika Lomas,, Brussels

24 April 2012

In a diplomatic note, the UK has called for changes to be made to the bilateral withholding tax agreement concluded with Switzerland last October, aimed at resolving the issue of the undeclared wealth of British residents held in Swiss banks.

Invoking the most favoured nation clause recently included in the Swiss/UK tax deal, Britain has requested that the same concessions be accorded to the UK as were granted to Germany earlier this month.

Germany and Switzerland recently confirmed the signing of a Supplementary Protocol amending the previous agreement of September 21, 2011, which allocates to Germany the payment of withholding taxes on German deposits held in Swiss banks.

The protocol revises the terms of the original accord and provides for a flat-rate taxation of the past of between 21% and 41%, compared to 19% and 34% originally negotiated.

However, a protocol to the Swiss, UK agreement, signed on March 20, introduced a most favoured nation clause for the regularization of the past, stipulating that should Switzerland, before the end of April 2012, agree with Germany to provide for a higher level of taxation than under the Swiss/UK tax deal, then the UK may request that the higher level also apply to its agreement with the Confederation.

Given the mounting criticism to the tax deal in the UK, London is rather unsurprisingly determined to pacify opponents by improving the basic conditions of the agreement, which must still be passed by lawmakers in the House of Commons.

The Swiss Federal Department of Finance (FDF) and the UK tax authorities are said to be in discussions to resolve the issue and to determine any necessary adjustments to the agreement.

TAGS: tax | investment | offshore confidentiality | law | banking | United Kingdom | offshore | legislation | offshore banking | banking secrecy | withholding tax | Germany | Switzerland

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