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The withholding tax agreements are an important component of the Federal Council's financial centre strategy. The agreements make it possible for foreign taxpayers who hold bank accounts in Switzerland to be taxed efficiently in accordance with the regulations of their country of domicile while safeguarding their privacy. In this way, past tax problems can be solved with one-off retrospective taxation. Moreover, the agreements govern the future taxation of investment income. For the contracting parties, the agreed system will have a long-term impact which is equivalent to the automatic exchange of information in the area of investment income.
Although the tax agreements are directly applicable, they nonetheless require legal provisions in Switzerland for implementation and enforcement. The IWTA contains provisions on organisation, procedure, judicial channels and the applicable criminal law provisions.
Under the tax agreements, persons resident in the relevant countries can retrospectively have their existing bank accounts in Switzerland taxed either by making a one-off payment or by disclosing their accounts. Future investment income and capital gains will be subject to a withholding tax. In this way, legal certainty will be increased and tax equity improved. In addition, Switzerland is reaffirming its efforts to ensure a competitive financial centre with integrity.
Further elements of the financial centre strategy are to be fleshed out by September 2012, particularly the extension of banks' due diligence requirements and tax aspects. Already in March 2009, the Federal Council had decided to accept the international standard on administrative assistance in tax matters. Over 40 double taxation agreements have since been amended.
Switzerland has signed three withholding tax agreements to date, i.e. with Germany, the United Kingdom and Austria. The Federal Council will submit the dispatch on the agreement with Austria to parliament in the coming days.The withholding tax agreements with Germany, the United Kingdom and Austria, as well as the associated International Withholding Tax Act should be considered by parliament during the upcoming summer session and enter into force at the start of 2013.