The Austrian Swiss Tax Agreement

Transcription

1 Practice Group Tax, Austria Newsletter April 2012 For further information, please contact: The Austrian Swiss Tax Agreement In an unexpectedly speedy process, on April 13, 2012 Austria and Switzerland signed the withholding tax agreement (the Agreement ), which is based on similar agreements signed by Switzerland with Germany and the UK, respectively. The Agreement is expected to raise Euro 1 billion in tax revenue in the year It is envisaged that after proper ratification by the contracting states, the Agreement shall enter into force as of January 1, The Agreement in Summary Vienna Imke Gerdes, LL.M., TEP, imke.gerdes@bakermckenzie.com Affected tax payers: The Agreement only concerns individuals holding Swiss bank accounts, provided those bank accounts existed on December 31, 2010 and January 1, In general, Private Foundations, corporations and other legal entities holding Swiss bank accounts are not affected; Applicable tax rates: the minimum tax applicable amounts to 15%, the regular rate is 30% and in some instances this rate can be increased up to 38%. Amounts transferred to the Swiss bank account between the signing of the Agreement and it entering into force ( the interim period ) from accounts held outside of Austria will only be covered by the Agreement up to a certain amount; Regularization of the past : the amounts in the Swiss account finally cleared under the Agreement through a one-off payment (withholding on capital) will be free of Austrian income tax, inheritance and gift tax and value added tax for all tax years ending prior to January 1, 2013; Vienna Diwok Hermann Petsche Rechtsanwälte GmbH Schottenring Vienna Austria Tel.: +43 (0) Fax: +43 (0) Seat Vienna FN g, HG Vienna DVR ATU Relevant Dates: only Austrian account holders who had/have a Swiss bank account on December 31, 2010 and still have it on January 1, 2013 will be subject to the provisions relating to the tax regularization of previously undeclared funds outlined below. Similar to the German and the UK agreements, the Agreement has special provisions relating to newly opened accounts or accounts transferred from one Swiss bank to another; Treatment of structures, entities and products: the definition of relevant person as well as relevant asset provides relatively clear guidance on how to deal with a situation where an Austrian resident has an interest in a structure or insurance wrapper. If the beneficial ownership cannot be determined, the Agreement does not apply; Stolen data relating to Swiss bank accounts and the prosecution of Swiss bank employees: as part of the Agreement, Austria declared that it will not actively

2 seek to acquire stolen data, in relation to Swiss accounts, that may be relevant for Austrian tax purposes. In addition, it agreed that it will not prosecute Swiss bank employees that took part in tax offences. Pending proceedings will be dismissed; Austrian market access: the parties have signed a memorandum on the provision of cross-border financial services in Austria by Swiss firms. As a result, obtaining a required license to operate on the Austrian market will be made easier and the Austrian regulator is obliged to issue such licenses within a period of three months. Cleaning the Past: Austrian Tax Regularization of Previously Undeclared Funds in Swiss Bank Accounts Final withholding on capital for the past Austrian tax residents with existing undeclared funds in Swiss bank accounts will be able to make a one-time flat-rate tax payment to settle on an anonymous basis any Austria taxes that might have fallen due in the past on funds in Switzerland. The applicable tax rates will vary from 15 % to 38 % of the funds credited on the Swiss account as of a specific date as detailed in the Agreement. The exact percentage will be determined based on the account balances on December 31, 2010 and December 31, 2012, however it will not depend on the actual amount of Austrian taxes due in the past. The relevant taxpayer will be cleared from having not paid income tax, inheritance and gift tax (which was applicable until August 1, 2008) and VAT and therefore, this withholding is a final settlement for those taxes. At the same time, the tax payer is may no longer be subject to a fiscal criminal proceeding. The tax payer has to ensure that on May 31, 2013 the bank account(s) provide(s) of sufficient funds to cover the withholding tax due. If the funds are not sufficient, the bank may grant the tax payer a grace period of further eight weeks. Is the tax payer unable to furnish the account with an amount covering the tax due, the Swiss bank has to notify the Austrian Ministry of Finance thereof. Exception from the final settlement The withholding will not be a final tax but rather only a payment on account to the Austrian tax authorities for those taxpayers (i) (ii) whose assets originate from money laundering according to Sec. 165 Austrian Criminal Code, or in relation to which the tax authorities already had concrete evidence that he possesses undeclared funds and this was already known to the tax payer or in relation to which the tax authorities have already initiated criminal proceedings for tax evasion. Further, amounts transferred to the Swiss bank account in the interim period from accounts outside of Austria will only be covered up to a certain amount. Any 2

3 amount credited to the Swiss bank account in the interim period and leading to the bank account balance on December 31, 2012 exceeding that on December 31, 2010 by 120% will not be covered by the Agreement. For the excess amount, the tax withheld is considered to be a prepayment on the tax due for the calendar year The latter also applies to transfers of assets held in Austria and effected in the interim period, whereas the 120% threshold is not applicable. Alternative to withholding - disclosure Instead of making use of the withholding payment, Austrian tax payers may consent to the disclosure of their name and other data that is necessary for their individual taxation to the Austrian tax authorities. This approach would appear particularly suitable for taxpayers who (i) (ii) have paid timely their Austrian taxes, or would face an unacceptably higher tax burden under the withholding approach. Such disclosure will be treated as valid voluntary self disclosure in the sense to Sec. 29 of the Austrian Fiscal Criminal Act, which has to be further substantiated by the tax payer within a period to be set by the tax authorities. As a consequence of a valid voluntary self disclosure, the tax payer may not be subjected to fiscal criminal proceedings. This consequence will not set in, if the underlying funds resulted from money laundering of if the tax authorities already had concrete evidence that the tax payer possesses undeclared funds and this was known to the tax payer or in relation to which the tax authorities have already initiated criminal proceedings for tax evasion. Tax payers who have not notified their bank by May 31, 2013 which procedure they wish to apply, will be subjected to the withholding procedure on a mandatory basis. No withholding tax for funds that are transferred abroad The Agreement is not applicable to bank accounts that are dissolved in the interim period. However, the Swiss Federal Tax Administration (SFTA) has to submit to the Austrian Ministry of Finance within twelve months after the Agreement entered into force a list comprising the ten most important countries or territories tax payers have transferred their funds to in the order of their importance and the number of persons involved per country or territory. Keeping the Future Clean: Final Withholding Tax on Future Income/Gains in Switzerland Final withholding on future income and gains Once the Agreement is in force, the Swiss banks will apply a final withholding tax of 25% on future investment income and capital gains of Austrian tax residents which equals the Austrian capital yields tax ( Kapitalertragsteuer ). Accordingly, this tax is a final tax and the tax payer does not need to include this income in his annual income tax return, provided the tax if withheld in a mere domestic context would also be considered a final tax under domestic law. 3

4 The proceeds of the withholding tax will be transferred by the Swiss banks to the Austrian Ministry of Finance via the SFTA. The Swiss Bank will remit the withholding tax levied within two months of the end of the calendar year to the SFTA. The SFTA in turn will transfer the amounts received to the Austrian Ministry of Finance within three months of the end of the calendar year. The tax due will be calculated by the Swiss bank in EURO and converts any amount credited in a currency other than EURO based on the exchange rate published by SIX Telekurs AG on the decisive date. The Agreement will not affect the withholding tax pursuant to the Agreement of October 26, 2004 concluded between the European Community and the Swiss Confederation providing for measures equivalent to those laid down in the EU Savings Directive (Council Directive 2003/48/EC on taxation of savings income in the form of interest payments). Therefore, the withholding tax of 35% under the EU Savings Directive will continue to apply. Withholding tax paid pursuant to the provisions of the EU Savings Directive will be credited against the withholding tax levied under the Agreement. The contracting states agreed however, to consult two years after the Agreement took effect if the credit system can be substituted by an easier system. Exception to withholding - automatic disclosure of information Alternatively and similar to the aforementioned disclosure option, Austrian tax payers can authorise their Swiss bank to report their future investment income and capital gains directly to the Austrian Ministry of Finance. In this case, the withholding tax under the Agreement will not apply but the tax payer has to declare the income in his annual income tax return. If the tax payer granted the Swiss bank permission to disclose the income instead of withholding the tax, the respective data will be forwarded to the SFTA within three months of the end of the calendar year. The SFTA will forward such information to the Austrian Ministry of Finance once a year, within six months of the end of the calendar year at the latest. Next Steps The legislative bodies of both contracting states must approve the Agreement. Within a period of two months after the Agreement entered into force (which will be March 1, 2013 based on the envisaged time line), Austrian account holders of Swiss accounts and deposits will be provided with an official notification and information by their financial institutions on the content of the Agreement and the resulting rights and obligations. As mentioned, the persons concerned have to make a decision on how to proceed by May 31, We would expect financial institutions to start contacting their relevant clients without delay on the assumption that the Agreement will come into force on January 1, 2013, to ensure such clients are aware of the options available to them and have the maximum amount of time in which to take informed decisions. 4

5 Conclusion First of all, the Agreement offers a pragmatic approach for Austrian residents to regularize their situation on an anonymous basis, provided they meet the conditions set out in the Agreement. Secondly, it offers a possibility to Swiss banks to continue to have a client relationship with Austrian tax payers with declared funds. However, tax payers are well advised to examine their specific situation and clarify, if a voluntary self disclosure would result in a lesser tax burden than the withholding tax under the Agreement. Certainly, the benefit of anonymity might also weigh in. This client newsletter is prepared for information purposes only. The information contained therein should not be relied on as legal advice and should, therefore, not be regarded as a substitute for detailed legal advice in the individual case. The advice of a qualified lawyer should always be sought in such cases. In the publishing of this Newsletter, we do not accept any liability in individual cases. Baker & McKenzie International is a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a partner means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an office means an office of any such law firm. 5