Since January 1st, 2018, Automatic Exchange of Information (AEOI) is effectively applicable, so that it is now possible for the Swiss Tax Administration to provide to its partner countries banking and financial information about foreign tax payers who have an account in Switzerland.
This progress in terms of transparency aims to reduce tax evasion through a mutual exchange of information between tax administrations. OECD is at the origin of this initiative and approved the implementation of Common Reporting Standard in order to define responsible authorities for the information processing and to describe how this information will be shared.
The principle is simple: each year, financial and banking institutions based in AEOI’s partner states must transmit to their tax administration information regarding their foreign clients. For instance, they have to communicate the tax number, the bank account number, the amount balance at the end of the year or the gross investment income. It is then to the Tax Authorities to inform jurisdictions where foreign tax-payers come from of the data in their possession. Nevertheless, this mechanism is only possible if a bilateral agreement has been signed between the two involved states, that is to say the tax payer’s home country and the one where the account has been opened. Finally, the obligation of using exchanged information solely for tax purposes must be strictly respected. The State in question will otherwise have to deal with its partner jurisdictions’ refusal to transmit collected data.
In Switzerland, after approval of the legal framework of AEOI by the Federal Assembly in December 2015, financial institutions started to collect information in January 2017 in view to transmit it to the Swiss Federal Tax Administration (SFTA). Since January 1st 2018, SFTA is now able to exchange information with its partner countries, such as Australia, Canada, UE member States, Japan or Norway. In addition, the communication of such data is based on the principle of reciprocity which implies not only that Switzerland must provide information but also that partner countries must be able to do so if a Swiss citizen has an account abroad.
Nevertheless, Switzerland’s position must be qualified, particularly regarding strictness with which it interprets the principle of specificity. Indeed, various bilateral agreements in which it took part can only operate in respect of a genuine use of the collected data, in others words for the sole purpose to collect taxes and not to tackle corruption or money laundering. Shared between banking secrecy and transparency, Switzerland will closely observe that this principle is respected and will not hesitate to suspend data exchange with its partners in the opposite case.
Finally, by meeting standards of Common Reporting Standard and of Automatic Exchange of Information, Switzerland safeguards its interests and asserts itself as a new place of financial transparency.