Friday, October 10, 2014

Swiss Consider Automatic Exchange of Information Pursuant to Model 1 FATCA Agreement!

During its meeting on 08.10.2014, the Federal Council adopted definitive negotiation mandates for introducing the new global standard for the automatic exchange of information in tax matters with partner states. The competent parliamentary committees and the cantons were consulted on the mandates in recent months. Negotiations with partner states should commence shortly.

On 21 May 2014, the Federal Council approved the draft mandates for negotiations on introducing the automatic exchange of information with the EU, the United States and other countries. The competent Federal Assembly committees and the cantons were consulted on these drafts in recent months. The vast majority supported the draft mandates.

On 21 July 2014, the OECD published the overall package for the automatic exchange of information in tax matters. The swift introduction of the standard was reaffirmed at the meeting of the G20 finance ministers held on 20 and 21 September in Cairns, Australia.

The cornerstones of the mandates definitively adopted by the Federal Council today are as follows:

  • The introduction of the automatic exchange of information is to be negotiated with the EU.
  • Regarding implementation of the Foreign Account Tax Compliance Act (FATCA), a Model 1 FATCA agreement should be with negotiated with the United States. With the new agreement, data would be exchanged automatically between the competent authorities on a reciprocal basis.
  • Negotiations on the automatic exchange of information will be initiated with further selected countries. In an initial phase, consideration will be given to countries with which there are close economic and political ties and which, if appropriate, provide their taxpayers with sufficient scope for regularization.
  • The introduction of the automatic exchange of information with foreign countries will be conducted by means of agreements with partner countries. Moreover, implementing legislation will be required in national law. This is currently being prepared by the Federal Department of Finance and will be submitted to parliament together with the negotiated agreements. The existing legislative framework excludes the automatic exchange of information.

Switzerland welcomes the new international standard, to which it contributed actively. It allows for a level playing field in the competition between financial centres, as these regulations apply to all, and is an important instrument in international efforts to combat tax evasion. Domestic bank client confidentiality will not be affected by the implementation of the new global standard.

It is important for the Federal Council that the requirements which it adopted in June 2013 are contained in the new standard. 

There is to be only one global standard, the exchanged information should be used solely for the agreed purpose (principle of specialty), the information should be reciprocal, i.e. should flow in both directions, data protection must be ensured and the beneficial owners of trusts and other financial constructs should also be identified. 

Moreover, the Federal Council has stated that the issues of regularization of the past and market access are to be addressed and solutions sought in negotiations on the automatic exchange of information with the EU and EU member states.

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