Switzerland: Effects Of Automatic Exchange Of Information On Voluntary Disclosures

Last Updated: 28 February 2018
Article by Jean-Marie Hainaut, Dominik Bürgy, Roger Krapf and Frédéric Bonny

In 2018, Switzerland will start executing the Automatic Exchange of Information (AEOI) since it will, for the first time, be transmitting to other countries the data collected from Swiss financial institutions in 2017, and also receiving from those countries information on the financial assets held outside Switzerland by Swiss taxpayers. The question has arisen as to what impact AEOI will have on Swiss taxpayers' right to regularize their tax position by disclosing unreported income and wealth to their cantonal authorities. On 15 September 2017, the Swiss Federal Tax Administration (SFTA) stated its position on the subject by publishing for the first time a position on the effects of AEOI on voluntary disclosures made after 31 December 2017. As the SFTA's information document was drawn up in collaboration with the "fiscal criminal law" working group of the Swiss Tax Conference (CSI/SSK), it can be assumed that the cantonal tax administrations, which are responsible for handling voluntary disclosures, will follow these principles.

1. Information exchanged within a defined timeframe

In line with the commitment entered at international level, Swiss financial institutions have, since the start of 2017, been collecting bank account data (account number, name, address, date of birth, investment income and account balance) for the purpose of sharing these, from 2018 onwards, with those countries with which it has concluded a corresponding agreement1.2 Starting 2019, the exchange will be extended to other countries and territories (the Swiss Parliament is currently additionally considering exactly which countries to enter into such agreements with3).

2. A unique opportunity for Swiss taxpayers to regularize their situation without incurring any penalty

Under the arrangements for nonpunishable voluntary disclosure in place with effect from 1 January 2010 at federal, cantonal and communal level, Swiss taxpayers have the opportunity once in their lives to disclose income and assets not previously mentioned in their tax returns without incurring any fine or other criminal sanction, which would normally apply to additional tax assessments. Hence, the consequences of such voluntary disclosure are limited to payment of the additional tax with respect to the last ten years and to the resulting interest, if the following conditions are met:

  • The evasion was not known to any tax authority;
  • The taxpayer cooperates unconditionally with the authority in determining the amount of the tax assessment;
  • The taxpayer endeavors to pay the amount of tax assessed; and
  • It is the taxpayer's first voluntary disclosure.

This right to regularize their tax position without penalty is accorded to taxpayers once only, and any subsequent voluntary disclosure will incur a fine. The fine for such a subsequent disclosure may, however, be reduced to one-fifth of the tax evaded if the first three of the conditions mentioned above are again met.

3. Effects of AEOI on voluntary Disclosures

As the automatic exchange of information relating to 2017 takes effect from 1 January 2018, the SFTA announced on 15 September 2017 that:

  • It is for the competent cantonal tax administration to judge whether the voluntary disclosure meets the conditions in law for the nonapplicability of a penalty.
  • The same cantonal administration is to judge whether the disclosure is voluntary on the basis of whether it already had any knowledge of the tax elements concerned.

However, those tax elements to which the AEOI applies will to be known to cantonal administrations by 30 September 2018 at the latest. It follows that disclosures will not be regarded as voluntary after that date.

To sum up, it will no longer be possible to make a non-punishable voluntary disclosure in relation to foreign bank and investment accounts from the moment at which information about a taxpayer has reached the SFTA by way of AEOI, but in any case no later than 30 September 20184.

It follows from this that it will no longer be possible for the condition specified in Art. 175, para. 3 (a) and Art. 181a, para.1 (a) of the FDTA5, namely that no other tax authority shall have had knowledge of the relevant assets, to be met. Therefore, any disclosure made after 30 September 2018 in relation to assets held in jurisdictions with which Switzerland has agreed a starting date of 1 January 2017 for AEOI will necessarily attract a fine calculated as in a case of tax evasion by reference to the degree of misconduct involved, which may amount to anything between one-third and three times the amount of tax evaded. Likewise, it logically follows that any voluntary disclosure in relation to assets held in jurisdictions with which Switzerland agrees a starting date of 1 January 2018 for AEOI, after 30 September 2019 will also necessarily incur a fine.

Finally, two exceptions must be noted: (1) only assets held in bank accounts are subject to the AEOI. Not covered are information on tangible assets located abroad (such as real estate, works of art, etc.). (2) this SFTA position, and the date of 30 September 2018, does not apply to the voluntary disclosure of assets held in Switzerland by Swiss taxpayers, as such assets are not reported under AEOI (a purely domestic situation).

4. How will voluntary disclosures made after 31 December 2017 be treated?

There is no change to the law regarding voluntary disclosures. In other words, it will still be possible to make disclosures after 1 January 2018, but subject to the risk of their not being recognized as voluntary if the country in which the assets disclosed are located has already sent the Swiss authorities information about the taxpayer before the latter made the disclosure.

As for bank accounts and investment income created after 2017 in states applying the AEOI after 2017, this rule will be applicable by analogy with effect from 30 September of the year during which the relevant information is first exchanged.

5. Simplified additional assessment for Heirs

The SFTA communication makes no mention of the simplified additional assessment for heirs provided for by Art. 153a FDTA (estate voluntary disclosure). This states that in the case of an estate with unpaid or undeclared tax liabilities, the additional tax assessment for heirs is limited to the three tax periods preceding the death of the deceased. Since the conditions for such simplified additional assessment are the same as those applicable to the non-punishable voluntary disclosure, the probability is that taxpayers will also no longer be able to avail themselves of this procedure in respect of assets abroad after they have been notified to the Swiss authorities by way of the AEOI, but at the latest after 30 September of the year during which such information is communicated.

6. Comments and recommendations

The precise details of the timetable for the communication of information from countries with which the AEOI is already in force are not known. It would therefore seem risky to rely only on the date of 30 September 2018 and to delay a voluntary disclosure until then. In view of the above and for the sake of prudence, we recommend that potentially affected taxpayers should regularize their tax situation with the Swiss tax authorities before 31 December 2017.

It must nevertheless be borne in mind that the SFTA communication is not a legally binding directive and that the courts may be asked to rule on certain matters not mentioned in it (for example on the case of information forwarded by a state after 30 September of the year in question; on information that should have been reported but was not, on the requirement in law that the cantonal tax administration show that it has actually had knowledge of the information concerned; or in the event of a cantonal administration taxing a taxpayer on income or assets for the previous year without taking into account information received by way of the AEOI, etc.).


1 The European Union (EU), Australia, Canada, Guernsey, the Isle of Man, Iceland, Japan, Jersey, Norway, and South Korea.

2 The AEOI agreement with the EU is binding on its 28 Member States and also applies to the Åland Islands, the Azores, the Canary Islands, French Guyana, Gibraltar, Guadeloupe, Madeira, Martinique, Mayotte, Réunion and Saint-Martin.

3 Andorra, Antigua and Barbuda, Argentina, Aruba, Barbados, Belize, Bermuda, Brazil, the British Virgin Islands, Chile, China, Colombia, Costa Rica, Curaçao, the Cayman Islands, the Cook Islands, the Faroe Islands, Grenada, Greenland, India, Indonesia, Israel, Liechtenstein, Malaysia, the Marshall Islands, Mauritius, Mexico, Monaco, Montserrat, New Zealand, Russia, St Kitts and Nevis, St Lucia, St Vincent and the Grenadines, San Marino, Saudi Arabia, Seychelles, Singapore, South Africa, the Turks and Caicos Islands, the United Arab Emirates and Uruguay.

4 The date specified in the Multilateral Competent Authority Agreement on AEOI, Section III ch. 3.

5 Federal Direct Tax Act.

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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