Since 1 January 2017, the Swiss banks have been implementing the automatic exchange of information (AEOI) with other countries. According to the AEOI Law and the Swiss Federal Data Protection Act ("DSG"), bank customers have the following rights, in principle:
1. In the relationship with the bank
The customer can claim legal protection under the Swiss Federal Data Protection At. In particular, a bank customer may request details as to which of the information collected about them by the respective bank is reported to the FTA (Federal Tax Administration). The bank must then send on request the annual AEOI statements. These extracts contain the information to be exchanged with the tax authorities in the respective tax domicile country. The information collected and reported may differ from the tax-relevant information. The customer may also require the bank to correct incorrect data in the system.
2. In the relationship with the Federal Tax Administration
There is also a right of access to the FTA. This may require that incorrect data based on transmission errors be corrected. If the transmission of the data would entail disadvantages that can’t reasonably be expected due to a lack of constitutional guarantees, the person concerned is entitled to legal protection under Article 25a of the Federal Act on the Administrative Procedure. A right of access to the FTA does not exist. This excludes the right to block the disclosure of personal data to the FTA. Furthermore, neither the legality of forwarding the information abroad nor the blocking of unlawful forwarding or the destruction of data that has been processed without a sufficient legal basis can be demanded.
What is the Automatic Exchange of Information?
The AEOI is an international standard that regulates how the tax authorities of the participating countries exchange data with each other about accounts and custody accounts of taxpayers. The goal is to make tax evasion impossible. The G20 member countries, the OECD and other major financial centers - more than 100 jurisdictions - have committed to apply the AEOI. An exception is the USA, which implemented its own standard (FATCA).
How does the Automatic Exchange of Information apply?
Under the Automatic Exchange of Information, the information on accounts and custody accounts of financial institutions are reported to the national tax authorities. They then exchange the information with the tax authorities of their AEOI partner countries. The responsibility for the collection of taxes is therefore entirely on the tax authorities of the AEOI partner countries.
Principles of the Automatic Exchange of Information
Switzerland was particularly hard hit by the AEOI, as it manages more than a quarter of the world's cross-border assets. It was therefore important for Switzerland that the AEOI standard was as practicable and fair as possible. That's why the Swiss government and banks in the OECD have been working hard to ensure that the AEOI standard meets the following principles:
- A single global standard;
- Compliance with the principle of specialty: the information may only be used for the purpose provided for in the agreement;
- Sufficient legal and technical data protection;
- Reciprocity - all states collect and exchange the same information;
- Same rules apply for all to determine the beneficial owners (controlling persons) including for trusts and domiciliary companies.
The basis of the Automatic Exchange of Information
The AEOI standard is a package of four elements, which are included in the OECD standard "Standard for the Automatic Exchange of Information on Financial Accounts":
1. Government Agreement or State Treaty
In order for two countries to be able to implement the AEOI standard, they need an intergovernmental agreement. The OECD provides a model agreement, the Competent Authority Agreement. This model government agreement can be used by states in which the government itself has the competence to commit the country to the new standard. Switzerland does not apply the CAA but concludes bilateral agreements in the form of state treaties.
2. Common reporting standard
The Common Reporting Standard (CRS) contains the actual AEOI standard. It has to be transposed into national law.
3. Interpretative comments
The interpretative comments substantiate the model agreement (CAA) and the common reporting standard (CRS) and include examples.
4. Technical application guidelines
They define the technical requirements for the exchange of data among the tax authorities and determine how data security is to be ensured.
The AEOI and bank-client secrecy
Switzerland has always followed international standards in tax matters. This means that it adheres to the standard established by the OECD and so far provides on request information on accounts of foreign taxpayers to the tax authorities of the respective countries. The AEOI automatically transmits account and custody account information to the tax authorities of the participating states. However, bank-client confidentiality can’t be abused by foreign customers in order to evade taxes in their country of residence. But even with the AEOI, bank client information remains well protected because the tax authorities are bound by data protection and the principle of specialty. In addition, bank-client secrecy remains as a professional secrecy. This means that Swiss bankers are still required to maintain secrecy about their customers and their accounts and portfolios. The protection of privacy remains an important concern for Swiss banks.
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