Neves Avocats
Switzerland will exchange information on financial accounts (including bank accounts, life insurance policies, interests in trusts or foundations) held in Switzerland by any person who is residing in the EU (28 countries), Australia, Canada, Gibraltar, Guernsey, Iceland, Isle of Man, Japan, Jersey, Norway and South Korea for the first time in September 2018.
Since the end of 2016, Switzerland has continued its efforts to increase the number of countries with which it will exchange information. In this context, the Swiss Federal Council initiated in December 2016 and February 2017, two consultation procedures regarding the extension of the Automatic Exchange Of Information (AEOI) to 41 additional countries, with a first exchange of information relating to 2018 envisaged in September 2019. The list of countries includes G20 members (South Africa, Argentina, Brazil, China, India, Indonesia Mexico and Russia), OCDE members (Chile, Israel), important economic partners (Colombia, United Arab Emirates, Liechtenstein and Malaysia) as well as several important financial centers (British Virgin Islands, Turk and Caicos Islands, Cook Islands, Cayman Islands, Bermuda, Belize).
On June 16, 2017, the Federal Council submitted each of the 41 AEOI agreements along with its Message on the introduction of the automatic exchange of information on financial accounts with 41 partner states from 2018/2019 to the Swiss Federal Assembly, so that both the National Council (Lower House) and the Council of States (Upper House) vote on it. Indeed, in order for AEOI to be activated between two countries, each country must notify the OECD with its own list of AEOI partner countries. In Switzerland, a given country may only be included in this list if approved by both Houses of the Parliament.
In its Message to the Federal Assembly, the Federal Council included the results of the analysis that have been undertaken on the situation in each country regarding the fulfillment of all other preliminary conditions, i.e.:
1. OECD Convention on Mutual Administrative Assistance in Tax Matters (the OECD Convention) and the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information (the MCAA) must be in place in both countries.
2. Internal AEOI legislation must be in place in both countries.
3. Adequate measures to ensure the required confidentiality and data safeguards must be in place in both countries.
4. Both countries include each other in the list of countries they submit to the OECD Secretariat in order to activate AEOI.
(See the developments below regarding Argentina, Brazil, Chile, Costa Rica, Colombia, Mexico, and Uruguay).
With all these elements in hands, the National Council has agreed to extend AEOI to 39 countries out of the 41 proposed by the Federal Council. The approvals were granted despite the systematic opposition of the right-wing party UDC, which succeeded in having the agreement with Saudi Arabia rejected (95 votes against, 92 votes in favor, 4 abstentions). The agreement with New Zeeland was sent back to the Federal Council for a further analysis.
Each approval was granted under the express condition that, before any exchange of information takes place with a specific country, the Federal Council reports back to the Parliament (i) on the measures which are implemented by each country to ensure the confidentiality of the data which will be transferred, (ii) on the number of AEOI agreements which are concluded by each country as well as (iii) on each country’s situation regarding the prevention of corruption.
The ball is now in the court of the Council of States, which will vote on each of the 41 AEOI agreements during its winter session, starting in November 2017.
In practice, the implementation of AEOI between Switzerland and any of the 41 above-mentioned countries will follow the steps that are described below:
i. On January 1, 2018, Swiss financial institutions including banks, life insurance companies and corporate trustees start collecting information on all financial accounts (including bank accounts, life insurance policies, interests in trusts or foundations) held in Switzerland by any person who is a taxpayer of a country having an AEOI agreement in place with Switzerland.
ii. All Swiss financial institutions are legally obliged to inform all affected clients, at the latest on January 31, 2019, that their personal data as well as information on their account(s) (account number, balance at year end, amount of interests and dividends…) will be transmitted to the SFTA and then by the SFTA to the relevant foreign tax authorities on September 30, 2019.
iii. On June 30, 2019 at the latest, all Swiss financial institutions will provide the SFTA with data relating to persons who are taxpayers of a country having an AEOI agreement in place with Switzerland.
iv. On September 30, 2019, the SFTA will transmit the data to the tax authorities of each country with whom Switzerland has agreed to introduce AEOI. On the same date, the SFTA will receive data relating to Swiss taxpayers who are domiciled in a partner country
AEOI between Argentina, Brazil, Chile, Costa Rica, Colombia, Mexico, Uruguay and Switzerland (Message from the Federal Council on the introduction of the automatic exchange of information on financial accounts with 41 partner states from 2018/2019, June 16, 2017)
Argentina
• OECD Convention in force since January 1, 2013.
• MCAA in force since January 27, 2016.
• AEOI related internal legislation (Decreto 618/97; Resoluciòn 3.826/2015) in force since end of 2015.
• Joint Declaration on the introduction of the AEOI on a reciprocal basis signed with Switzerland on November 16, 2016. Switzerland and Argentina intend to start collecting data in accordance with the AEOI standard in 2018 and to exchange it from 2019 onwards.
• Switzerland considers that the confidentiality and data safeguards framework in place in Argentina is adequate. As a consequence, AEOI will be reciprocal from the start.
Brazil
• OECD Convention in force since October 1, 2016.
• MCAA signed on October 21, 2016.
• AEOI related internal legislation (Instruçao Normativa RFB N°1680) in force since end of 2016.
• Joint Declaration on the introduction of the AEOI on a reciprocal basis signed with Switzerland on November 18, 2016. Switzerland and Brazil intend to start collecting data in accordance with the AEOI standard in 2018 and to exchange it from 2019 onwards.
• Switzerland considers that the confidentiality and data safeguards framework in place in Brazil is adequate. As a consequence, AEOI will be reciprocal from the start.
Chile
• OECD Convention in force since November 1, 2016.
• MCAA signed on June 4, 2015.
• AEOI related internal legislation is currently being prepared.
• Joint declaration on the introduction of the AEOI on a reciprocal basis signed with Switzerland on November 29, 2016. Switzerland and Chile intend to start collecting data in accordance with the AEOI standard in 2018 and to exchange it from 2019 onwards.
• Switzerland considers that the confidentiality and data safeguards framework in place in Chile is adequate. As a consequence, AEOI will be reciprocal from the start.
Costa-Rica
• OECD Convention in force since August 1, 2013.
• MCAA signed on June 4, 2015.
• AEOI related internal legislation (new Section 106quater, amendments to Sections 106bis, 106ter and 115 of the Codigo fiscal) is already in force.
• The Global Forum Expert panel has rated the confidentiality and data safeguards framework in place in Costa Rica as insufficient. Costa Rica does therefore not fulfill all requirements for a reciprocal exchange of information with Switzerland. If Costa Rica fails to implement the measures that have been defined by the Expert panel, Switzerland will only implement a non-reciprocal exchange of information (i.e. Switzerland will not transmit any information to Costa Rica but Costa Rica will transmit information to Switzerland).
Colombia
• OECD Convention in force since July 1, 2014.
• MCAA signed on October 29, 2014.
• AEOI related internal legislation (Resolucion 000119 dated November 30, 2015) in force since January 1, 2016.
• Switzerland considers that the confidentiality and data safeguards framework in place in Colombia is adequate. As a consequence, AEOI will be reciprocal from the start.
Mexico
• OECD Convention in force since September 1, 2012.
• MCAA signed on October 29, 2014.
• AEOI related internal legislation (Modificacion al Anexo 25-Bis de la Resolucion Miscelanea Fiscal para 2016 dated October 29, 2015) in force since January 1, 2016.
• Joint declaration on the introduction of the AEOI on a reciprocal basis signed with Switzerland on November 18, 2016. Switzerland and Mexico intend to start collecting data in accordance with the AEOI standard in 2018 and to exchange it from 2019 onwards.
• Switzerland considers that the confidentiality and data safeguards framework in place in Mexico is adequate. As a consequence, AEOI will be reciprocal from the start.
Uruguay
• OECD Convention in force since December 1, 2016.
• MCAA signed on November 2, 2016.
• AEOI related internal legislation (ley n°19.484) in force since January 1, 2017.
• Joint declaration on the introduction of the AEOI on a reciprocal basis signed with Switzerland on November 18, 2016. Switzerland and Uruguay intend to start collecting data in accordance with the AEOI standard in 2018 and to exchange it from 2019 onwards.
• Switzerland considers that the confidentiality and data safeguards framework in place in Uruguay is adequate. As a consequence, AEOI will be reciprocal from the start.
Automatic Exchange of Information – Swiss financial institutions’ duty to provide information to clients residing abroad
Article 14 of the Swiss Federal Law on AEOI obliges all Swiss financial institutions including banks, life insurance companies and corporate trustees to inform all affected clients of the fact that personal information as well as financial data on their account(s) will be reported to the tax authorities of their country of residence. The law states that such communication must occur at the latest on January 31 of the year of the first transmission, i.e. January 31, 2018 for clients residing in the EU, Australia, Canada, Gibraltar, Guernsey, Iceland, Isle of Man, Japan, Jersey, Norway and South Korea and January 31, 2019 for clients residing in any of the 41 countries with which an AEOI agreement will be in effect at the end of 2017. This obligation is intended to make the clients aware of their rights under the Swiss data protection legislation. Indeed, the affected clients are in particular entitled to (i) know whether and by whom their data are being processed, (ii) obtain details of the data that are collected and, if necessary, (iii) request that such data is rectified. The Swiss Federal Council indicated that since the affected clients are informed at least on 31 January of the year of first data transmission, they have five months (i.e. until 30 June) in order to undertake any relevant steps towards their bank or other financial institution in order to control that the data is complete and adequate before it is transmitted to the Swiss Federal Tax Administration (SFTA) for further submission to the foreign tax authorities.
One should however be aware that the duty of information under Article 14 of the Swiss Federal Law on AEOI does not oblige Swiss financial institutions to include the details of the information that they will transmit. Swiss financial institutions are also not obliged to repeat such a communication every year a reporting has to be undertaken regarding a specific client. A one-off communication that takes place only in the year of the first transmission is sufficient.
Taking the above in good consideration, it is very important that the affected clients request from their bank, their life insurance or their corporate trustee to receive the details of the information which these financial institutions intend to transmit to the SFTA in order to ensure that such information does not contain any error or mistake. Such steps should be undertaken with the assistance of a qualified advisor as early as possible.