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Switzerland Set To Renegotiate German Tax Deal

by Ulrika Lomas,, Brussels

07 May 2013

Marking a swift and somewhat surprising about-turn, Switzerland has announced its willingness to hold talks with Germany on a new withholding tax agreement between the two countries.

During an official working visit to Bern, Germany's Foreign Affairs Minister Guido Westerwelle held economic talks with his Swiss counterpart Didier Burkhalter. During the course of the meeting, Federal Councillor Burkhalter underlined Switzerland's continued commitment to negotiating a bilateral tax deal with Germany. Burkhalter made clear that the Confederation would be prepared to look closely at the German Parliament's decision to reject the original tax accord.

Burkhalter has underlined that the current situation is simply not satisfactory, stressing that chance finds and the questionable use of stolen tax data discs is unpleasant for both sides. Although Swiss banks advise their clients to regulate their tax situation, there is no obligation to do so and therefore no guarantee, Burkhalter explained, emphasizing that a tax accord would serve as a comprehensive solution.

Germany’s Foreign Minister Guido Westerwelle welcomed the Swiss Government's willingness to engage in a fresh round of talks, underlining the fact that "tax evasion and tax crime are best fought via treaties and agreements." The German Government intends to continue discussions in a "constructive spirit" to reach a diplomatic solution, Westerwelle stated.

German Opposition parties blocked the initial Swiss-German withholding tax agreement in the German Bundesrat, or upper house of parliament, at the end of last year. The Social Democrats and Green Party argued that the text was too lenient on tax evaders.

Negotiated by German Finance Minister Wolfgang Schäuble, the bilateral tax treaty 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 in future treated in the same way as in Germany.

The accord also provided for a 50% tax to be imposed on inheritances in Switzerland, unless German residents opted to declare their inheritance to the German tax authorities.

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

TAGS: Finance | tax | investment | agreements | tax rates | withholding tax | Germany | Switzerland

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