Fewer untaxed UK assets in Switzerland than predicted
The Swiss Bankers Association (SBA) has stated that Switzerland’s tax agreement with the UK, which entered into force on January 1 2013, will result in far less revenue for the UK exchequer than previously assumed.
The tax agreement means that accounts held by UK taxpayers in Switzerland will be hit with a flat-rate anonymous withholding tax charge, unless taxpayers disclosed the assets by the end of May – a deadline which has now passed.
“The agreements provide for an anonymous withholding tax for banking relationships,” said Dieter Weber, founding partner of Tax Partner – Taxand Switzerland. “Swiss banksdeduct a flat rate tax on existing assets from UK clients (past) and on investment income and capital gains (future) and forward the corresponding tax amount anonymously to the Swiss Federal Tax Administration to be transferred to the tax authorities in the UK.”
The anonymous withholding tax is a final withholding tax, so once it is paid the tax liability is considered settled.
But despite the mechanism being up and running, the SBA says that first indications from selected banks in Switzerland indicate there are fewer untaxed assets in the country than previously assumed.
This is mainly because many clients have resident non-domiciled status.
“These clients are not liable to taxation in the UK, and thus do not fall under the agreement,” the SBA statement said. “Furthermore, numerous UK clients have opted for voluntary disclosure, which comes as no surprise given the latest developments in Switzerlandwith regard to the announced adoption of a global standard for the automatic exchange of information.”
The SBA said that as a result of these initial findings, less tax than expected is being transferred to the UK by means of the one-off payment.
“The possibility can therefore not be ruled out that either none or only a small part of the banks’ guarantee payment of CHF 500 million ($516 million) will be recovered,” said the SBA statement.