UK and International Tax news
Switzerland and UK Agree Cooperation On Tax
Thursday 28th October 2010
At a meeting in London on 25 October 2010 between Federal Councillor Hans-Rudolf Merz and the Chancellor of the Exchequer, George Osborne, the two finance ministers discussed cooperation on financial and tax matters. Afterwards Federal Councillor Merz and David Gauke, the Exchequer Secretary to the Treasury, signed a declaration on the initiation of negotiations concerning tax issues between Switzerland and the UK. They reaffirmed the willingness of both countries to further intensify cooperation in financial and tax matters and to strengthen long-term legal security for market participants.
By signing the joint declaration, negotiations will be held on the expansion of cross border cooperation in tax matters and improved market access for banks. They are to be based on the exploratory talks recently conducted by a joint working group and will commence as soon as both governments have issued their respective mandates. The Federal Council intends to approve the mandate after consulting the relevant parliamentary committees and other interested parties by the end of the year. Negotiations are expected to commence at the beginning of 2011. The outcome of the negotiations will then be submitted to parliament.
Both sides have agreed that a new solution should enable distortions to competition in terms of tax issues to be avoided. UK taxpayers should not be deterred from holding bank accounts in Switzerland and the possible risk of tax evasion should not impact on their investment decisions.
During the exploratory talks, Switzerland and the UK agreed on a lasting solution which respects the protection of bank client privacy. Consequently, the automatic exchange of information will no longer be an issue between the two states. The solution will apply with no retroactive effect, and is to cover the following:
(a) Regularisation of the past – untaxed existing assets should be regularised.
(b) Final withholding tax for the future – future investment income should be subject to a withholding tax at source, the rate of which is to be agreed and will fulfill the tax obligation of the country of domicile of the taxpayer. Extended administrative assistance has been agreed in order to prevent any possibility of circumventing the withholding tax, which envisages that the UK authorities may submit requests for administrative assistance which state the name of the client, but not necessarily the name of the bank. The number of requests will be limited and must be well founded as fishing expeditions will not be permissible.
(c) Further elements – Switzerland and the UK intend to tackle the issue of market access for Swiss financial institutions in the UK. The package includes measures to decriminalise banks and their staff.
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