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Agreement between Switzerland and Germany on tax matters

Agreement between Switzerland and Germany on tax matters

In September 2011 Switzerland and Germany signed a cooperation agreement regarding the area of taxation and financial markets. The agreement covers assets held by the clients at banks, brokers, PostFinance and asset managers in Switzerland. However, it will mainly concern banks.

Regularisation of the past

The agreement applies to:

– natural persons domiciled in Germany who are the beneficial owners of an account or deposit held in Germany with a Swiss bank;
– the assets held by a domiciliary company or a foundation (or by a nominee) with a Swiss bank; and
– certain financial products (eg, insurance wrappers).
Once the agreement has entered into force (presumably on January 1 2013), all clients will have five months to choose one of the following options:

– Anonymous regularisation by way of a one-off flat-rate tax. The regularisation of the past is subject to a nominal 34% tax rate. However, the actual taxation will vary between 19% and 34%, whereas most relevant persons will be subject to a 20-25% tax rate, mainly due to statutes of limitation.

– Voluntary disclosure to the German tax authorities without penalty and voluntary notification to the Swiss Federal Tax Administration (SFTA).
– Voluntary notification to the SFTA (this option is open only to bank clients which were already tax compliant).

Where clients fail to indicate one of the three options to the bank, the one-off payment will be levied.

Withholding tax for the future

Within five months after the entry into force of the agreement, bank clients will have to choose one of the following options:

– The bank will deduct an amount annually on an anonymous basis from income from assets equivalent to the German income tax. The deduction of this withholding tax will have the effect of satisfying any tax liability in Germany. The tax rate is 26.375%. It will apply to income from assets (interest income, dividends, other income and capital gains).
– Bank clients can authorise the bank to notify the SFTA of the income from their assets under management in Switzerland. The SFTA will then forward this information to the responsible German authorities.

Compliance of agreement with EU law

The European Commission is currently analysing the compliance of the agreement with the distribution of competences between the European Union and member states, with the provisions of the EU Savings Tax Directive and with the Swiss-EU Agreement on the taxation of savings.

Christophe Rapin
Christophe Petermann

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