Automatic exchange of information (AEI): the new world of fiscal transparency
Switzerland has committed to implementing the global standard for the automatic exchange of information (AEOI). As a result, the Swiss Abroad face greater fiscal transparency.
About 100 countries have already committed to implementing the AEOI standard. The aim of the new regulations, which Switzerland helped draw up, is to prevent cross-border tax evasion. The Organisation for Economic Cooperation and Development (OECD) approved the global AEOI standard back in 2014. The AEOI is due to be introduced in Switzerland from 2017 onwards so that the first data can be exchanged with selected jurisdictions in 2018.
The AEI will have no impact on domestic banking secrecy. However, it will affect Swiss citizens who live abroad and have bank accounts in Switzerland. Swiss tax authorities will therefore be obliged to report relevant information to the respective tax authorities abroad. If, for instance, a Swiss citizen living in Paris has an account at a Swiss bank in Zurich, the bank will report information about his financial accounts to the Federal Tax Administration, which will then pass this information on to the French tax authorities. The diagram below clarifies the way in which the AEOI works.
Two forms of implementation
The first group of countries (the “early adopters”) will start exchanging data from 2017. Switzerland, which starts in 2018, belongs to the second group. There are basically two models for implementing the AEOI: either bilateral national agreements are concluded to define implementation or the Multilateral Competent Authority Agreement (MCAA) is applied. This is based on the Convention on Mutual Administrative Assistance in Tax Matters, signed by the Council of Europe and the OECD. The MCAA is designed to ensure that its signatories implement the AEOI bilaterally (cf. diagram)
AEOI with partner countries
To date, Switzerland has signed declarations with Australia, Jersey, Guernsey, the Isle of Man, Iceland, Norway, Japan, Canada and South Korea on the basis of the MCAA (model 2). The Swiss parliament has already approved the introduction of the AEOI with Australia. The agreements with the other countries will be put to the Federal Assembly for approval later this year.
In May 2015, Switzerland and the EU signed an agreement to introduce the AEOI. This applies to all 28 EU Member States and replaces the agreement with the EU on the taxation of savings income, which has been applied since 2005. This corresponds to model 1 (cf. diagram). Parliament has approved this agreement. Just as with the AEOI agreements mentioned above, Switzerland and the EU intend to start collecting account details in 2017 and exchange information from 2018 onwards. Switzerland also plans to implement the AEOI with other countries.
Special situation with regard to the US
Swiss citizens living in the United States will be subject not to the AEOI but to the FATCA (Foreign Account Tax Compliance Act) agreement between Switzerland and the US. This agreement stipulates that financial institutions in Switzerland must report account information directly to the US tax authorities with the relevant customer’s consent. Last year, the Swiss State Secretariat for International Financial Matters (SIF) began negotiating a new FATCA agreement with the US on reciprocal data exchange.
Regularisation of the past
To enable their taxpayers to make a smooth transition into the AEOI, many countries offer them an opportunity to make a voluntary self-declaration. This enables them to regularise previously untaxed assets and prevent or reduce potential fines. Further information on this can be obtained from the responsible tax authorities in your country of residence.