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22 August 2019 / news

Revision of the federal law and the ordinance on the AEOI

The consultation on the revision of the federal law and ordinance on the International Automatic Exchange of Information in Tax Matters (AEOI) ended on 12 June 2019. The aim of the revision is to implement the recommendations issued by the Global Forum on Transparency and Exchange of Information for Tax Purposes (Global Forum) in order to comply with the international standards for transparency and information exchange. The proposal will be discussed by the Parliament in spring 2020 and the revised federal law and corresponding ordinance on the AEOI is expected to enter into force on 1 January 2021.

Office with a view

The goal of the AEOI is to increase tax transparency and therefore prevent cross-border tax evasion. Since 1 January 2017 Swiss financial institutions are required to collect information on their clients who are tax resident in a partner jurisdiction of Switzerland. These data are transmitted by the Swiss Federal Tax Administration on a yearly basis to the competent authority of the partner jurisdiction. In Autumn 2018 financial account information was successfully exchanged for the first time with 36 partner jurisdictions. The data to be collected can be divided into three categories and include, among others, the following:

  • Identification information: name, address, jurisdiction of residence, date of birth and tax identification number (TIN). For individuals domiciled in Switzerland the TIN corresponds to the Swiss social security number (AHV), for legal entities with registered office in Switzerland the company identification number (UID) is considered as TIN
  • Account information: account number, name and address of the Swiss financial institution
  • Financial information: account balance, closure of the account, gross amount paid or credited on the account (e.g. interest income, dividends, other financial income, etc.)

Based on the recommendations of the Global Forum, the draft federal legislation provides for the repeal of the exception currently applicable to condominium owners’ associations and certain amendments to the due diligence obligations. In addition, the amounts currently specified in CHF must be exclusively indicated in U.S. dollars and the obligation for reporting Swiss financial institutions to keep documents (although already implemented in practice) must be included in the Swiss legal basis. Certain provisions currently specified in the ordinance relating to co-owners associations, associations and foundations as well as their accounts, consignment accounts and accounts that are excluded under the law of the country of residence of their account holder will be repealed or amended. Finally, certain provisions relating to due diligence and registration requirements and the definition of U.S. dollar amounts will be clarified in accordance with the draft federal legislation.

Regardless of the recommendations of the Global Forum, it is intended to include, among others, provisions regarding trustee-documented trusts and a provision authorizing the Swiss competent authority to suspend the AEOI with a partner jurisdiction if the latter does not comply with the OECD requirements for confidentiality and data protection.

What is the impact of this revision?

Associations and foundations are qualified as non-reporting financial institutions according to the currently applicable Swiss legislation. With the entry into force of the proposed amendments, these associations and foundations, provided that the requirements are met, would be treated as reporting financial institutions and, consequently, would have to comply with the obligations arising from international agreements and the Swiss legislation on the AEOI. It is expected that the revision would have a stronger impact on foundations as they may likely be qualified as professionally managed investment entities. Consequently, not only beneficiaries, but also the founder and the member(s) of the foundation board would be covered by the reporting obligation, which could lead to personal information having to be submitted by the foundation board.

Condominium owners’ associations and co-owners associations are qualified as non-reporting financial institutions according to the currently applicable Swiss legislation. However, the repeal of the provisions relating to these entities should have no practical consequences as these entities should qualify, according to the Global Forum, as non-financial entities and not as financial institutions.

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