Germany Seeks To Iron Out Swiss Tax Deal Issues

Monday 19 March 2012

Germany Seeks To Iron Out Swiss Tax Deal Issues

by Ulrika Lomas, Tax-News.com, Brussels

19 March 2012

Following recent ‘constructive’ talks with his colleagues from Social Democrat- (SPD) and Green Party-led federal states, German Finance Minister Wolfgang Schäuble has agreed to hammer out with Switzerland certain changes to the bilateral Swiss-German tax deal, signed in September.

Baden-Württemberg’s Finance Minister Nils Schmid (SPD) reiterated that without “considerable improvements” to the agreement, the SPD and Green Party would not support the plans in the Bundesrat, or upper house of parliament.

Marking significant progress, however, Schmid underscored that the party did not want the plans to fail, indicating that it would be prepared to accept the fact that there would not be a provision providing for an automatic exchange of information between the tax authorities, and that the party would uphold

Switzerland’s insistence on the preservation of banking secrecy to ensure anonymity.

The SPD and Green parties are opposed, however, to the provision contained in the agreement providing that German citizens with ‘old money’ held in Swiss bank accounts would merely be subject to a proposed one-off flat tax of between 19% and 34%, to legalize their accounts.

The SPD has also urged the government to ensure that money can not be transferred from Switzerland to another country following the entry into force of the agreement on January 1, 2013.

A spokesman for the Swiss State Secretariat for International Financial Affairs has confirmed that the government in Bern is willing to enter into further discussions with Germany, provided that the core content of the agreement remains intact.

Germany and Switzerland signed the agreement back in September. Wealth of German citizens in the Confederation has been estimated at around EUR180bn (USD237bn).

Germany has already planned certain changes to the September deal to appease the European Commission.

In the case of conflict, provisions contained in existing European Union (EU) tax agreements will have priority over the regulations provided for in the treaty between Germany and its neighbouring country.

In concrete terms this will apply to the treatment of interest income earned by German nationals with accounts held in Switzerland. Such income is currently subject under the terms of the EU savings tax directive to a 35% rate of tax.

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