Swiss / UK Tax Agreement
Private Client Services news bulletin
14 August 2012
Guidance on the Swiss tax cooperation agreements awaited
Customers wish guidance but uncertainty remains
Significant changes were announced to the bilateral tax agreements in April 2012. The percentage rates to be imposed as a one off historical levy were increased so that the minimum rate became 21%, while the maximum rate became 41%. Important adjustments were made to harmonise the position in relation to EUSD, and to account for inheritance tax, thus resolving both technical difficulties and EU challenge. The path seemed clear so that the agreements could be implemented by January 2013 as envisaged. However since the spring there have been a number of challenges in the respective countries, which has led to speculation that implementation may be delayed.
Banks are continuing to prepare whilst awaiting the publication of official guidance. In its absence of this, there are a number of aspects which cannot be interpreted definitively, and both tax advisors and banks will be unable to provide answers to all of the questions raised. At the time of writing there is therefore considerable uncertainty albeit that customers are continuing to anticipate the measures, and to seek advice so that they may understand how the agreements might affect them.
Changes to the Liechtenstein Disclosure Facility
Greater investments required from participants
The Liechtenstein government has announced that it will change the terms by which the Liechtenstein Disclosure Facility (‘LDF’) operates. These changes will affect the investments which have to be made so as to qualify for participation in the LDF and will therefore have to be considered by affected UK taxpayers from now on. The LDF dates back to the August 2009 Memorandum of Understanding (‘MOU’) agreed between Liechtenstein and the United Kingdom. The MOU created the LDF framework under which UK taxpayers can make disclosures of offshore tax liabilities with the years of assessment limited back to 1999 only, no fear of prosecution, and a limited 10% penalty. Since December 2011 UK taxpayers seeking to qualify for the LDF had to first obtain a certificate from the Liechtenstein Financial institution confirming that they had made a ‘meaningful investment’ in Liechtenstein. However, there was no definition of what a ‘meaningful investment’ actually was, either in terms of amount, or in comparison to total offshore assets. Following a 10 July meeting, Liechtenstein’s Prime Minister Klaus Tschütscher stated that: “concrete threshold values are now used to establish clear criteria for confirmation of relevance within the framework of the Liechtenstein Disclosure Facility (LDF)" It is understood that from 1st September no certificate of relevance will be issued unless the following conditions are met:
- In the case of Banks – a lodgement of at least 20% of undisclosed, worldwide bankable assets or CHF 3 million.
- In the case of a Trust Company – at least 10% of undisclosed, worldwide bankable assets or CHF 1 million.
- In the case of a Legal Entity domiciled abroad but managed in Liechtenstein – at least 15% of undisclosed, worldwide bankable assets or CHF 1 million.
- In the case of an Insurance Company in Liechtenstein – a policy with a minimum premium of CHF 150,000.
The changes will raise the bar for those who wish to participate in the LDF albeit the clarification of what was previously uncertain can only be welcomed. The explanatory notes published by Liechtenstein indicate that banks may also seek to stipulate how long funds are kept in Liechtenstein, albeit it is difficult to see how this could be enforced. In the meantime, those who wish to take advantage of the LDF would do well to undertake early review. Finally, it remains to be seen whether the changes will make the LDF less beneficial to UK taxpayers and whether those with undisclosed tax liabilities re Swiss bank accounts will revisit whether the proposed UK Swiss agreement is now any more attractive.
Deloitte’s UK / Swiss tax agreement advisory team
Providing UK tax advice in Switzerland
Catherine Shepherd and Craig Thomson are senior UK specialists and commentators on high net worth private client work and tax investigations. They work in all of Deloitte’s offices across Switzerland, alongside our Financial Services and Global Tax Employment specialists.
Clients who require tax advice in anticipation of the UK / Swiss tax agreement coming into force in 2013 are therefore be able to obtain comprehensive advice in Switzerland. We are also able in relation to the Liechtenstein Disclosure Facility (LDF) so that all UK tax compliant options can be considered in advance of any decisions being taken.
If you have any further queries or require further information, please do not hesitate to contact us.