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Swiss Bankers Welcome Tax Deal With Austria

by Ulrika Lomas,, Brussels

18 April 2012

The Swiss Bankers Association (SBA) has recently taken note of the signing of the bilateral tax agreement between Switzerland and Austria, and has welcomed the fact that the Confederation’s strategy for tax conformity, defined over two years ago, has now been substantiated with a third European country following the agreements signed with the UK and with Germany.

The SBA underscored in its statement that the core elements of Switzerland’s 2015 financial strategy are also respected in the latest agreement with Austria, namely anonymity, final effect of tax payments, tax rates for the future and bilateral market access.

The SBA says: “The signing of the three agreements underlines (the Swiss banking industry's) commitment to acquire and manage taxed assets only”.

It adds: “It can be positively noted that both an upfront payment and the system control measures have been waived. This sends out a clear signal for future tax agreements with other European countries.”

The association ends: “We believe the agreement allows clients from Austria to regularize their tax situation while at the same time protecting their financial privacy.”

Swiss President Eveline Widmer-Schlumpf and Austria's Federal Minister of Finance, Maria Fekter recently signed in Bern a withholding tax agreement, aimed at resolving the issue of undeclared accounts held by Austrian residents in the Confederation, while maintaining traditional Swiss banking secrecy.

Based on the same model as the Swiss tax agreement with Germany and with the United Kingdom, the agreement provides that persons resident in Austria can retrospectively tax their existing banking relationships in Switzerland either by making a one-off tax payment or by disclosing their accounts.

In accordance with the terms of the agreement, future investment income of Austrian bank clients in Switzerland will be subject to a withholding tax, and the proceeds of this will be transferred anonymously to the Austrian authorities by Switzerland. In addition, mutual market access for financial services will be improved.

Although the bilateral tax agreement between Switzerland and Austria corresponds largely to the agreements with Germany and the UK, there are differences concerning the applicable tax rates.

The rate for the flat-rate one-off payment for regularizing existing accounts 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.

No advance payment by Swiss banks has been agreed. Moreover, as both contracting parties consider the existing administrative assistance procedure sufficient, no additional enquiry possibilities have been agreed.

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.

Commenting on the latest announcement, the Swiss Federal Department of Finance (FDF) underscored that the conclusion of the agreement with Austria is yet another indication that Switzerland is serious about its new financial centre strategy. The text creates legal certainty and should strengthen the competitiveness and reputation of Switzerland's financial centre in the long- term, the FDF adds, stressing that Switzerland does not want any further untaxed assets in the future.

Underlining the “clear and obvious” benefits of the treaty to investors, Austria’s Finance Minister Maria Fekter emphasized that the signing is “a great outcome” and “a major success”.

The withholding tax treaty with Switzerland “will secure tax revenues that are owed to Austria” and will enable individuals to legalize their offshore accounts, the Austrian minister added.

Dismissing claims that investors will merely close their accounts before the treaty enters into force, Fekter said: “Switzerland is giving an undertaking to the Austrian authorities that it will provide statistics on the main destination countries of clients who have closed accounts in Switzerland. Austria can and will take appropriate action with respect to those countries.”

Concluding her remarks, Fekter highlighted the fact that the additional revenues arising from the treaty provisions will enable the Austrian government to reach its budgetary targets, and serve to put Austria in an even stronger position.

The agreement requires the approval of parliament in both countries, and should enter into force at the start of 2013.

TAGS: individuals | tax | investment | offshore confidentiality | interest | banking | offshore | agreements | offshore banking | banking secrecy | tax rates | withholding tax | Austria | Switzerland

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