Automatic Information Exchange – at a Swiss bank near you – sooner than you thought

I’ve just finished a telephone call with a Swiss banker. I won’t say who they work for, but it’s a very large bank.

Non Swiss company clients who bank at his bank can expect a letter from them next month (February 2014) explaining certain changes to their policy as a result of new Swiss regulations. This will be followed by a letter in March giving those company clients two straightforward options…

Option 1: The company clients can sign a ‘disclosure’ form permitting the bank to automatically send information about the company assets held at the bank to the tax authority in the beneficial owner’s home jurisdiction. For now at least, this is information about income – not information about balances on the accounts

Option 2: Each company client can obtain a letter from a qualified tax advisor from his home jurisdiction, addressed to the bank which confirms that the fiduciary structure holding the money has been properly planned, is declared as required in the client’s home country and all domestic taxes settled. In this case, the bank will NOT make any disclosure to the home jurisdiction of the client. It is uncertain at this time which tax advisors will be considered as qualified tax advisors.

Of course, there is an Option 3, which is to refuse to sign the disclosure form as per option 1 or provide the tax advisor letter envisaged in Option 2. In this case, what will happen? My understanding is that these clients will be ‘rounded up’ and placed in special ‘naughty’ unit within the bank; certain services will be withdrawn and in due course such business relationships will be subject to ‘termination’ by the bank (presumably starting with the least profitable and working upwards)..

I don’t think Swiss secrecy law will permit the disclosure of such accounts to third party tax authorities, except in the case of information exchange requests which are valid under Swiss law. Having said that ‘Group disclosure requests’ (i.e ‘fishing expeditions’) seem more commonplace in Switzerland compared with the UK and Isle of Man where Tax Information Exchange Requests tend to be dealt with on a more ‘case by case’ basis and ‘fishing expeditions’ are unlawful.

photo credit: thenoodleator via photopin cc

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