Automatic Exchange of Information – International Tax Policies
Switzerland has long been regarded as a tax haven because of its small and affluent economy which is governed in an extremely robust manner. When compared to other economies around the world, the tax burden in Switzerland is moderate and its tax policies aim at minimizing the chances of tax evasion and increasing the attractiveness of the economy. This is one of the reasons why Switzerland garners the attention of many organizations who plan to conduct business in Europe.
Automatic Exchange of Information (AEOI)
The latest standards of AEOI aim at preventing cross-border tax evasion. Countries who have agreed to AEOI will be able to mutually exchange information regarding financial accounts curbing tax evasion on a global scale. The collection of data began from January 1, 2017 and data will be exchanged with the partner countries in 2018. Once information is exchanged, the responsibility for levying the taxes will lie with the tax authorities in the country to which information has been provided.
Switzerland will start collecting data on 1 January 2017 and exchange it for the first time in 2018. The Federal Assembly approved the statutory basis back in December 2015.
Double Taxation Agreement
When a person or a company has domiciled in more than one country, then the chance of double taxation can arise where tax is collected by two different countries at the same time. To avoid this predicament, the double taxation agreement was signed which allows countries to exchange financial information for tax purposes. This minimized the hindrances of cross-border economic transactions by companies or individuals.
Tax Information Exchange Agreements (TIEAs)
As a member of the Organization for Economic Co-Operation and Development (OECD), Switzerland has also signed TIEAs with a number of countries. This allows the participating countries to exchange information that can help countries avoid harmful tax practices. While DTAs ensure the avoidance of double taxation, TIEAs are mainly the exchange of information for curbing unwanted tax practices.
While the tax burden in Switzerland is comparatively moderate for multinationals, the country continues to ensure that organizations do not indulge in malpractices when it comes to paying taxes. It is a member of OECD and Switzerland has also been an active participant in the Base Erosion and Profit Shift (BEPS) project. A country by country report is being prepared by Switzerland which will provide an overview of the global allocation of income and taxes paid by the multinational companies in the country. Contact us today to learn more about the facilities and services we offer
Taxation of Savings Income
Switzerland recognizes the importance of levying adequate tax on cross-border investment incomes. The country is currently participating in in the Automatic Exchange of Information so that it can provide financial details to partner countries in order to reduce tax evasion on a global level.
Foreign Account Tax Compliance Act (FATCA) Agreement
Switzerland signed the FATCA agreement with the US in 2014. According to the agreement, Swiss financial institutions will provide the account details to the US tax authority with the consent of the clients, for those clients who do not consent to the disclosure of their details, the United States will have to go through normal administrative assistance channels.
The international tax policies in Switzerland can be characterized as follows:
• It allows for smooth cross-border economic transactions
• It ensures that the companies and individuals pay comparatively moderate taxes
• It recognizes the importance of minimizing tax evasion and takes necessary steps including signing agreements with other countries and organizations to ensure the reduction of harmful tax practices.
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