Some comments on Switzerland, the OECD, the Common Reporting Standard and the Automatic Exchange of Financial Information.

In 2018, Switzerland will be part of the programme for the automatic exchange of financial information developed by the Organisation for Economic Co-operation and Development (“OECD”). Under this programme, the Switzerland´s private banks will put an end to bank secrecy. In other words, Switzerland will begin to compile information about their non-resident clients which will be then sent to the relevant tax authorities on an annual basis. The information includes the clients’ capital income and the account balance.

Switzerland, which – according to the Swiss Bankers Association (“SBA”) – manages 25% of cross-border assets, had a financial system impenetrable to third parties who attempt to obtain data about their residents holding accounts in Switzerland. So far this country only sent information upon request of each of the countries with whom it had entered an agreement to avoid double taxation. However, the cooperation was not ensured since the requesting country had to prove that the client had avoided taxes and no generic investigation was permitted without the client´s name or account number. As from 2018, the tax authorities no longer have to make specific requests about the accounts of their residents in Switzerland; instead, the information will be sent automatically.

It is expected that in 2018 Switzerland would exchange information with 38 foreign tax authorities, including countries from the European Union, and in 2019 with other countries such as Uruguay, Argentina, Brazil and Chile. In fact, on November 16, 2016, Argentina and Switzerland signed a joint declaration on the introduction of a reciprocal automatic exchange of financial information for tax purposes in order to collect it in 2018 and exchange it in 2019. (Please see “Argentina and Switzerland signed a joint declaration on the introduction to AEOI”)

In this context, Switzerland looks for protection against a possible misuse of the clients´ financial data. It considers the criminal use alarming as well as it is afraid of whether some governments may reveal information from Swiss accounts to the media for political purposes. In fact, the SBA holds that the data may be sold or use to pressure the clients or their families.

Switzerland is working with OECD to adopt measures to ensure the protection of the information subject to the exchange, which will only be used for tax purposes. In this way, this year Switzerland has started to implement the Common Reporting Standard (“CRS”) developed by the OECD. Under these rules, Switzerland will control whether the involved jurisdictions comply with the requirements related to data security and confidentiality. This means that Switzerland may decide to not accept the information exchange with certain countries for security reasons.

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