Italy & Switzerland To Begin Talks of Tax Agreement

[TheOffshoreAdvisor]

Italy & Switzerland To Begin Talks of Tax Agreement

Following the recent tax treaties between Switzerland, the UK and Germany, a meeting held on May 9 between Swiss and Italian officials has agreed to the establishment of a working group to resolve the outstanding tax problems between their two countries.

The meeting, led by the diplomatic adviser of the Italian Economy and Finance Ministry, Carlo Baldocci, and the secretary of state for international fiannce matters of the Swiss Federal Finance Department, Michael Ambúhl, particularly discussed a model agreement for the regularization of undeclared assets of Italian residents held in Switzerland and the introduction of a withholding tax on the future income from those assets.

Many Italian politicians have, in fact, been expressing their lack of understanding recently as to why the Italian government had not already begun talks with the Swiss government to sign such a withholding tax treaty on the lines the latter has already concluded with Germany, the United Kingdom and Austria.

Those treaties permit the countries***8217; residents to pay tax retrospectively on currently undeclared bank accounts in Switzerland, either by making a one-off tax payment or by making a full disclosure of their banking affairs. They also provide for a final withholding tax to be levied on any future investment income and capital gains of those bank clients in Switzerland.

It has been suggested that the additional tax revenue that would be available to Italy if it were to agree such a deal, on an estimated EUR150bn (USD194bn) of undeclared Italian funds in Switzerland, could amount to up to EUR40bn up-front, with other significant funds paid annually thereafter.

In addition, the meeting discussed Switzerland's place on the Italian ***8216;black list***8217; of countries, and the necessary modifications that would need to be made to the (previously agreed but uncompleted) double taxation agreement between the two countries with regard to the exchange of tax information so that Switzerland could be taken off that list, as well as possible changes to the existing agreement on the taxation of Italian cross-border workers.

It was agreed at the meeting that a working group would be established to try and resolve all of the above-mentioned tax problems, and that its first meeting would be held on May 24, 2012. Furthermore, it is planned that a working meeting will also be held shortly between the Italian Premier Mario Monti and the President of the Swiss Federation Eveline Widmer-Schlumpf.

[askesis]

If it is going to be the same deal as the one they made with Germany there will be obvious ways to keep banking in Switzerland, while avoiding any danger...

[TheOffshoreAdvisor]

These agreements between Switzerland and the UK as well as a futuree Italian agreement do allow one to continue to bank in Switzerland and protect your privacy. However, this privacy comes at the cost of a withholding tax as high as 30% on undeclared accounts, past and future capital gains for citizens of these countries.

Switzerland no longer wants undeclared or untaxed money.

[askesis]

Not completely true, let's take the Germany-Switzerland agreement:

all you need to do is to move your funds outside Switzerland (could be the same bank but in an outside branch, e.g. in a different tax haven) before 31st May 2013. After that wait a bit and wire again the money back in Switzerland. Then Switzerland will have absolutely no obligation to communicate your name to German authorities.

Moreover the deal applies only to Germans that have their funds there at least from October 2011 to 31st May 2013. As for funds deposited after May there will be applied only a 25% tax rate on interests, account holders names will not be communicated.

Interesting thing is that with this agreement it is now much more difficult for Germany to discover tax evasion, since part of the deal says that Germany will not actively pursue tax evasion by "using infos stolen to Swiss Banks about their customers".

[TheOffshoreAdvisor]

Germany cannot buy stolen data but the OECD standard language on tax information exchange means it will be much, much easier for Germany to obtain account holder information from Swiss banks with some basic evidence such as use of a Swiss issued debit card in Germany or transfers back and forth between Switzerland and Germany.

Besides, rather than paying 26% interest on future interest, investment and capital gains taxes means Germans will likely look elsewhere to deposit their assets and earn tax free income.

[askesis]

Let's assume that Switzerland doesn't want to be the "home" of undeclared income... so why keep banking in Switzerland then ?

Hiding undeclared income has been almost the only reason for banking in Switzerland since decades, it would be just not rational if they would drop it all...