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December 27, 2017

Automatic exchange of information and banking secrecy

Since 1st January 2017, Switzerland has been participating in the Automatic Exchange of Information, also known by the acronym “AEOI”, with the OECD and the G20 member countries. This international standard aims to strengthen fiscal transparency.

Under this new regulation, Swiss banks are required to report to the Swiss Federal Tax Administration (FTA) a certain amount of information on the identity and status of accounts (income and assets) of customers who are resident outside Swiss territory for tax purposes. The FTA then exchanges the information it receives with the tax authorities of the customer's country of residence, which will collect the relevant taxes. 

The first exchanges should take place from 1st January 2018 and will cover data collected between 1st January and 31st December 2017 with the Member States of the European Union.

However, even with the AEOI, information about bank customers remains protected, as the tax authorities are required to ensure data protection and thus respect the principle of speciality. This defines the framework for use of the transmitted data: it can only be used by the relevant authorities, and only in the context of income tax statements and for no other reason.

Impact on bank secrecy in Switzerland

With the new AEOI standard, Switzerland and financial markets around the world are now on par: banking secrecy for tax purposes no longer applies to taxpayers in countries that have signed the AEOI agreement and have accounts in Switzerland.

On the other hand, for Swiss residents, this agreement does not change anything. Currently, except in exceptional and particularly serious cases, the Swiss authorities cannot demand the lifting of banking secrecy to verify a Swiss taxpayer's declarations. Owing to this fact, however, the introduction of AEOI is the subject of intense political debate. In response to the Federal Council's bill to revise federal criminal tax law, the Swiss right wing in 2014 launched an initiative to protect the private sphere ("Yes to the protection of the private sphere"), in order to counter the setting up of automatic exchange of fiscal data on Swiss taxpayers by anchoring banking secrecy in the Federal Constitution.

The Federal Council, however, finally gave up on its revision of criminal tax law last November, and consequently the basis for the right's initiative was nullified. Banking secrecy thus remains preserved for taxpayers resident in Switzerland.


jirsak / 123RF Banque d'images
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