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Switzerland and Germany sign tax agreement

On September, 21, 2011 in Berlin, a tax agreement was signed by Germany's Finance Minister, Wolfgang Schäuble, and Switzerland's Finance Minister, Eveline Widmer-Schlumpf. The agreement will resolve the outstanding issues that have existed for decades between Germany and Switzerland concerning the taxation of German investors' investment income in Switzerland. The negotiations led to a fair outcome that ensures a balanced reconciliation of interests between the two countries, particularly from a tax equity viewpoint.

The agreement represents a good result for the two countries, as it satisfies the interests and requirements of both countries equally well. The tax agreement signed by Switzerland and Germany respects the protection of bank clients' privacy applicable in Switzerland and also ensures the implementation of the German authorities' legitimate tax claims. In addition, mutual market access for financial services will be improved. For the future, a final withholding tax will ensure equal tax treatment of investment income irrespective of whether the income in question was generated in Switzerland or Germany. This will be accompanied by an exchange of information that goes beyond the OECD minimum standard. It will be used for process checks and introduce a significant additional mechanism for detecting potential new "black money" in Switzerland. A lump-sum solution has been found for the past: German investors with investment income in Switzerland will be given a way out of tax flight that is linked to a fair tax burden and that on the whole, leads to an equitable burden that is materially comparable with that of investors who were already tax-compliant. Those who could previously bide their time and wait for tax and penalty claims to expire – often under the statute of limitations – without paying anything, must now fulfill their tax obligations. Both sides acknowledge that the agreed system will have a long-term impact that is equivalent to the automatic exchange of information in the area of capital income. The agreement requires the approval of parliament in both countries, and should enter into force at the start of 2013. Upon signing by both finance ministers, the complete text of the agreement will also be published.

FAQ on TAX treaty with Germany Oct.2011