The OECD's new global standard on Automatic Exchange of
Information (AEOI) is designed to reduce tax evasion. Switzerland,
at present, is setting up a legal framework with a view to
exchanging data from 2017 in 2018.
The basis for the AEOI is the OECD Common Reporting Standard
(CRS), which is implemented in Switzerland by national legislation.
The Federal Act on International Automatic Exchange of Information,
approved by the Swiss parliament, will come into force on 1 January
2017. Further details and regulations can be found in the Ordinance
on International Automatic Exchange of Information. This is
scheduled to come into effect the same day, though to date, only a
As the AEOI is rather complex, the Swiss Federal Tax
Administration (SFTA) responsible for its execution has issued a
draft guideline to specify the duties of Swiss financial
institutions (FIs) and other affected parties. This guideline is
extensive, covering aspects such as: the material, temporal and
geographical scope of the legislation; criteria for institutions to
qualify as FI in Switzerland and to be subject to reporting or
non-reporting duties; financial accounts; reportable accounts;
controlling persons; and non-financial entities. It outlines due
diligence procedures and covers issues such as FI registration and
sanctions. It also contains regulations on reporting and on
informing the client. The guideline is expected to prove very
helpful to FIs as they evaluate how to comply with AEOI
Treaties and agreements
The AEOI requires international treaties and agreements, the
most important of which, from Switzerland's point of view, is
with the European Union. The country has also signed treaties with
Australia, Guernsey, the Isle of Man, Iceland, Japan, Jersey,
Canada, Norway and South Korea, and is planning to conclude further
treaties with other jurisdictions.
Many Swiss companies and individuals have international
connections, in some cases with early adopters. As a result, some
are already affected by the AEOI and need, for example, to fill in
entity classification forms (e.g. for a foreign FI). Countries
implementing the CRS have found that its practical application can
be very difficult, in spite of guidance from the OECD. For example,
some entities are structured in ways that fail to match exactly the
classifications outlined in the CRS.
As has been noted, some countries are early adopters and others
are not. In addition, the AEOI presupposes the conclusion of
treaties between jurisdictions – a time-consuming process
that leads to the adoption of the CRS.
This can produce unwanted results and effort. Take, for example,
so-called professionally managed investment entities. Based on the
CRS, an FI must treat such an entity that is not in a participating
jurisdiction as a 'passive non-financial entity' and must
therefore report the controlling persons. If such jurisdiction
qualifies as a participating jurisdiction by concluding a treaty
later on, then the reporting of controlling persons of such entity
is no longer necessary. In the ordinance mentioned earlier,
Switzerland addresses this issue with a 'white list'
whereby countries that have not concluded a treaty regarding AEOI
with Switzerland, but have committed to exchanging information
under the CRS, are treated as participating jurisdictions.
The US is also classified as a participating jurisdiction in the
white list. For the moment, it is not clear how long the list will
be in force.
Other countries have drawn up similar lists, but Switzerland is
so far the only one to include the US. The reason, according to the
Swiss, is that the US already has a standard for international
exchange in tax matters in the form of the Foreign Account Tax
Compliance Act (Fatca). Theoretically, this could lead to a
situation in which a controlling person is reported in neither
Switzerland nor the US.
The AEOI legislation is due to come into force in Switzerland on
1 January 2017. Swiss companies need to clarify their status under
the CRS in order to be ready for data collection.
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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