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Austria & Switzerland Join Forces on Undeclared Capital Assets

Austria & Switzerland Join Forces on Undeclared Capital Assets
10 Jul 2012

Austria and Switzerland have concluded a tax treaty providing for anonymous, retrospective taxation of undeclared capital assets of Austrian-resident individuals in Swiss bank accounts. Further, a withholding tax system will be established to secure taxation of these capital assets in the future. Taxand Austria and Taxand Switzerland explore this new relationship in greater depth.

According to estimations of the Ministry of Finance, Austrian-resident individuals harbour capital assets of up to EUR 20 billion in Swiss bank accounts and deposits, hidden from the Austrian tax authorities. The tax treaty, which was signed on 13 April 2012 and due to enter into force on 1 January 2013, aims to secure Austrian tax revenue from Swiss capital assets in the future, and to decriminalise tax evasion in the past.

The treaty applies to Austrian-resident individuals (resident as of 31 December 2010), who have capital assets in a Swiss bank account or deposit from 31 December 2010 to 1 January 2013.

Retrospective tax

a. Anonymous one-off payment

The account holder may opt for anonymous taxation of his capital assets that have been undeclared to the Austrian tax authority until now. Taxation is imposed by way of a one-off, lump-sum payment at a tax rate of 15 to 38 %. The payment amends for evasion of income tax, VAT and inheritance/gift tax (ineffective as of 1 August 2008) and exempts the taxpayer from liability for retrospective tax evasion.

b. Voluntary self-disclosure

Alternatively, the account holder may authorise the Swiss bank to forward information and data on the capital assets to the Austrian tax authority. The tax authority will then ask the account holder to complete the self-disclosure and impose taxation based on the actual circumstances in the past. This act of self-disclosure will lead to an exemption of penalties for tax evasion.

Unless the account holder authorises the Swiss bank to forward his data to the Austrian tax authorities before 31 May 2013, the anonymous lump-sum payment will be imposed automatically by the Swiss bank. Account holders transferring their capital assets outside of Switzerland between 13 April 2012 and 1 January 2013 will continue to be subject to prosecution under the Austrian fiscal penal code.

However, in both cases the exemption of penalties shall not apply to money derived from criminal activities (eg. money laundering), or if the tax authority has already been aware of tax evasion by 13 April 2012 or has already taken prosecution measures.

Taxation in the future

As of 1 January 2013, account holders may choose to:

a. Have their capital income, dividends and capital gains taxed anonymously at a withholding tax rate of 25% (corresponding to the Austrian withholding tax on capital gains); or

b. Authorise the Swiss bank to disclose account information to the Austrian tax authorities.

Interest within the scope of the Agreement between the EU and Switzerland on taxation of interest payments will continue to be subject to the EU-withholding tax of 35%.


Taxand's Take

The treaty does not apply to account holders transferring undisclosed capital assets outside of Switzerland between 13 April 2012 and 1 January 2013. However, if undisclosed capital assets are transferred outside of Switzerland between 13 April 2012 and 1 January 2013, the account holder will continue to be subject to the Austrian fiscal penal code and might face prosecution. If the account holder wishes to disclose his Swiss capital assets to the Austrian tax authorities, notification of the Swiss bank has to be made by 31 May 2013.

There is no general advice to Austrian-resident individuals affected by the tax treaty as to which option (anonymous lump-sum payment/withholding tax or disclosure of the account) is preferable, since the actual tax burden may vary considerably depending on individual circumstances. It is therefore recommended that individuals affected by the tax treaty seek professional advice.

Your Taxand contact for further queries is:
Herta Vanas
T. + 43 1 533 86 33 800

Roger Dall'O
T. +41 44 215 77 31

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