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Switzerland Settles UK Upfront Withholding Tax Payment

by Ulrika Lomas, Tax-News.com, Brussels

04 February 2013


The Swiss Federal Tax Administration (FTA) has recently transferred CHF500m (USD549m) to the United Kingdom as an upfront payment, as provided for in the bilateral withholding tax agreement between the two countries.

The upfront payment guarantees the United Kingdom a minimum amount from as yet untaxed assets of UK taxpayers in Switzerland.

Based on the agreement with the United Kingdom, which entered into force on January 1, 2013, Swiss banks paid CHF500m to the FTA. The FTA has now transferred this amount to the United Kingdom as security for minimum tax revenues from anonymous retrospective taxation.

The reimbursement of this upfront payment to Swiss banks will start as soon as CHF800m from retrospective taxation has been transferred to the UK tax authorities. Once the system of regularization of the past has generated CHF1.3bn, then the upfront payment to Swiss banks will be fully reimbursed. Further payments from the regularization of the past will in turn be transferred to the UK tax authorities.

The withholding tax agreement with Austria, which likewise entered into force on January 1, 2013, makes no provision for an upfront payment.

All UK and Austrian taxpayers with a bank account or securities deposit in Switzerland are affected by the agreements. Clients either pay a withholding tax, which is deducted directly from their account and transferred anonymously to their country of domicile, or they must disclose their account details.

The agreements solve the problem of untaxed funds in that foreign tax authorities receive the tax payments they are legally entitled to whilst the privacy of bank clients is safeguarded. Withholding tax agreements are part of the Federal Council's new financial market policy. Negotiations on agreements with other countries are under way.

TAGS: compliance | tax | investment | tax compliance | tax avoidance | banking | United Kingdom | offshore | agreements | offshore banking | banking secrecy | withholding tax | Austria | Switzerland

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