Swiss Share Account Data Ending Era Of Bank Secrecy

by Ike Obudulu Posted on October 5th, 2018

Zurich, Switzerland : Switzerland’s tax authority is sharing information on its notoriously secret banking system with foreign partner agencies as part of a new international initiative.

Switzerland’s Federal Tax Administration exchanged details of more than two million bank accounts registered in the country with international partners as part of a financial transparency initiative called the Automatic exchange of information (AEOI). The international agreement, to which Switzerland is a signatory, came into force in January 2017.

As part of its first data exchange in the program, Switzerland handed over details on accounts held at 7,000 financial institutions to EU partners and nine other partner territories: Australia, Canada, South Korea, Guernsey, Isle of Man, Iceland, Japan, Jersey and Norway.

The data shared includes identification details, account and financial information – including name, address, state of residence and tax identification number – as well as information concerning the reporting financial institution, account balance and capital income.

The AEOI, which will now take place on a yearly basis, helps local authorities crosscheck the status of local tax declarations through international verification. “The exchanged information allows the cantonal tax authorities to verify whether taxpayers have correctly declared their financial accounts abroad in their tax returns,” said the Swiss government in a statement (EN).

In return, the Swiss authority gained access to data from “millions” of accounts which were shared by its partners. It is the first time the Swiss government has participated in such an exchange.

“Cyprus and Romania are currently excluded as they do not yet meet the international requirements on confidentiality and data security,” adds the statement.

The annual data swap will expand next year to about 80 partner states, provided they meet requirements on confidentiality and data security. The OECD Global Forum on Transparency and Exchange of Information for Tax Purposes reviews states’ implementation of the accord.

Under international pressure, Swiss banking secrecy has weakened for years, meaning rich people from around the world can no longer easily use the Alpine republic to hide wealth.

The changes have put Switzerland in fierce competition with faster-growing centers like Hong Kong and Singapore.

Automatic exchange of information (AEOI)

Cross-border tax evasion should be prevented with the help of the global standard for the automatic exchange of financial account information (AEOI). To date, more than 100 countries, including Switzerland, have committed themselves to introducing this global standard in the area of tax transparency. Domestic bank client confidentiality in Switzerland is not affected by the AEOI.

The legal foundations for introducing the AEOI entered into force on 1 January 2017. The AEOI was activated with 38 states and territories on this date. Since then, Swiss financial institutions subject to the reporting duty have been collecting account information concerning persons resident in these partner states for tax purposes.

This data will be exchanged for the first time in autumn 2018. Parliament adopted the federal decrees concerning the introduction of the AEOI with further partner states from 2018/1019 in December 2017. This means that Swiss financial institutions have been collecting account information in connection with a further 38 partner states (including Hong Kong and Singapore) since 1 January 2018, and this will be exchanged for the first time in autumn 2019.

Combating tax evasion

In the wake of the financial and debt crisis, combating tax evasion worldwide has become an important issue which is broadly pursued by the global community. In July 2014, the OECD Council adopted the new global standard for the international automatic exchange of information in tax matters. During the plenary meeting of the Global Forum in October 2014, almost 100 countries committed themselves to introducing this new global standard. Approximately 50 states have announced that they will start to exchange in 2017 and the remainder will follow in 2018. Domestic bank client confidentiality in Switzerland is not affected by the AEOI.

The global standard

Switzerland actively participated in the preparation of the global standard. It was important for the Federal Council that the standard satisfied exacting requirements in terms of compliance with data protection and the principle of speciality. Consequently, data may be used solely for tax purposes. The standard should also guarantee reciprocity and encompass robust regulations for identifying the beneficial owners of all types of legal entity, including trusts and domiciliary companies.

What information will be exchanged?

The standard applies for both natural persons and legal entities. The actual beneficial owners of the account have to be identified in application of the OECD standard and the FATF recommendations. The information to be transmitted includes account and tax identification numbers, as well as the names, addresses and dates of birth of taxpayers abroad with an account in a country other than the country of origin, all types of income and account balances.

Statutory basis and implementation

In order to be able to introduce the AEOI standard, the Federal Assembly adopted the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (administrative assistance convention), the Multilateral Competent Authority Agreement on the Automatic Exchange of Financial Account Information (MCAA) and the Federal Act on the International Automatic Exchange of Information in Tax Matters (AEOI Act) on 18 December 2015. The Ordinance on the International Automatic Exchange of Information in Tax Matters (AEOI Ordinance), which contains the implementing provisions for the AEOI Act, was adopted by the Federal Council on 23 November 2016. The legal basis for the AEOI was thus created and entered into force on 1 January 2017.

The AEOI can be implemented by means of a bilateral treaty or on the basis of the MCAA. The MCAA is based on the OECD/Council of Europe Convention on Mutual Administrative Assistance in Tax Matters. It makes provision for the automatic exchange of information being activated bilaterally.

Author

Ike Obudulu

Ike Obudulu

Versatile Certified Fraud Examiner, Chartered Accountant, Certified Internal Auditor with an MBA in Finance And Investments who has both worked for and consulted with some of the world's largest companies on main street and wall street in over 20 countries, Ike brings his extensive reporting and investigations experience to bear on his role as Chief Editor.
Phone
Email

Leave a Reply