After almost three years' negotiations over untaxed Italian
assets in Swiss banks, Switzerland and Italy have reached an
agreement in principle on future cooperation in tax matters.
The agreement between Switzerland and Italy was initialled on 19
The two governments are currently preparing the signature of a
Protocol of Amendment to the double taxation agreement which should
be signed before the deadline set for Italy's voluntary
disclosure programme on 2 March 2015.The double taxation
agreement (DTA) between Switzerland and Italy is to be
supplemented by a protocol that makes provision for the OECD
standard for the exchange of information upon request.
"After years of controversy, this agreement should improve
relations between Switzerland and Italy in relation to financial
and tax matters - says
Alessandra Bellanca, Partner in the E.U. Tax Team - It will
simplify the regularisation of untaxed assets before the automatic
exchange of information is introduced and limit risks' exposure
arising from legal proceedings for banks and their
When the new Swiss-Italian tax agreement will enter into force,
Switzerland will be removed from Italian black lists and it will
lead to an orderly transition to the future automatic exchange of
information and to a simplified regularisation of Italian bank
clients' assets without massive outflows of capital.
The Swiss-Italian DTA contains the following clauses in
Automatic exchange of information: The OECD standard is to be
introduced between Switzerland and Italy in the future with a new
Regularisation of the past: Italian taxpayers with an account
in Switzerland can take part in the Italian voluntary disclosure
programme (VDP) under the same conditions as those in other
countries that are not on a black list. Both countries can make
group requests to identify persons who wish to conceal untaxed
assets. The OECD standard applies in this respect; fishing
expeditions are not permitted.
Prosecution of taxpayers as well as financial institutions and
their employees: Taxpayers who participate in the VDP get a reduced
penalty. Financial institutions and their employees are not
responsible for the tax offences of their clients in principle.
Financial institutions' cooperative behaviour with the
regularisation of their clients will be looked upon
Taxation of cross-border commuters: In the future, cross-border
commuters should be subject to reduced taxation in the state where
they work as well as regular taxation in their country of domicile.
The proportion in the state of work will be a maximum of 70% of the
total withholding tax.
Italian black lists: With the entry into force of the Protocol
of Amendment to the DTA, Switzerland will be removed from lists
that are based solely on the absence of the exchange of
Financial market access: Both sides confirmed their intention
to seek ways of enhancing cross-border cooperation and financial
Further amendment of the DTA between Switzerland and Italy: In
a second stage, it will be sought to reduce the tax rates on
dividends and interest payments, amend the abuse provision and
include an arbitration clause.
From the Italian taxpayers' point of view, the agreement
will considerably increase legal certainty for Italian taxpayers
who have an account in Switzerland. This agreement is the
precondition to reduce the taxable period for Italians with secret
accounts from 10 years down to 5 years only. Furthermore, Italy
will allow Italians to maintain their account relationships with
Swiss banks because Switzerland is now considered as cooperative
For the Swiss banks, these will be authorized to retain tax
compliant funds of Italians still in Switzerland.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The Cyprus Tax Department recently issued Forms T.D 38, T.D 38Qa and T.D 38Qb applicable to individuals being Cyprus tax residents but non-Cyprus domiciled.
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