The Federal Council signed the Protocol of Amendment for the double tax treaty (DTT) between Switzerland and Italy on 23 February 2015. This revision will also open the door to administrative assistance requests in accordance with the OECD standard. As a result, any currently non-compliant Italian clients of Swiss banks must make a voluntary disclosure as soon as possible.
Administrative assistance in accordance with the OECD standard
Upon signing the treaty, Switzerland pledged to grant administrative assistance and thus disclose account information to Italy, including the names of both the holder of an account as well as its beneficial owner, provided that:
- Switzerland has received a concrete request for administrative assistance from Italy
- the information sought must be expected to be relevant in terms of enforcing Italian tax law. Correspondingly, administrative assistance will not only be provided in cases of tax fraud, but also tax evasion
- the name of the owner of the information, e.g. the bank or insurance company, does not necessarily have to be stated
- the taxpayer in question does not have to be identified by name since the revised DTT also permits group requests in accordance with the OECD standard. In the event of a group request, the request for administrative assistance must define a group of taxpayers for which it can be presumed that all of the individuals specified within the group failed to meet up to their Italian tax obligations. A group request of this nature could target clients who close a bank account in Switzerland, for instance. Likewise, this is explicitly provided for in the roadmap to improved bilateral relations with Italy (also published).
Once the revised DTT has entered into force (which is not expected to happen before 2016), administrative assistance requests and thus group requests, as well, can be submitted for circumstances which existed or arose on or after the date the Protocol of Amendment for the DTT was signed (23 February 2015). This means that all Swiss bank/custody accounts that still existed on 23 February 2015 can be included in an administrative assistance request.
Italian clients who hold an undeclared bank account in Switzerland therefore have no choice but to participate in Italy’s voluntary disclosure program. Their names will be disclosed no matter what, either in 2018 within the scope of the automatic exchange of information if the account is still open or included in a group request for administrative assistance if they close their account after 23 February 2015.
Switzerland will no longer be treated as a blacklisted country
By amending the treaty, Switzerland has complied with Italian legislative requirements which call for the return of capital moved abroad as well as an intensification of efforts to combat tax evasion. In terms of how taxes and fines are calculated under the disclosure program, Switzerland is now considered to be on the white list. Accordingly, fines are calculated over a period of four years (or five years in the event of a failure to file tax returns) instead of eight years (or ten years in the event of a failure to file tax returns).
Roadmap to improve bilateral relations with Italy
Apart from the protocol, the Federal Council also published a roadmap in which both countries commit to introducing the automatic exchange of information. Furthermore, the roadmap specifies that banks should be entitled to have their clients sign a waiver that permits the bank to disclose information about clients who have participated in the Italian voluntary disclosure program directly to the Italian tax authorities upon request without being in violation of Art. 271 of the Swiss Criminal Code (Unlawful activities on behalf of a foreign state). This would enable clients of Swiss banks to take advantage of additional penal relief and put them on equal footing with clients who decide to transfer their assets back to Italy. Clients who choose to remain in Switzerland are thus treated no differently than those who repatriate their money.
The roadmap also specifies that Swiss financial intermediaries and their employees cannot be penalized for aiding and abetting the crimes of any Italian taxpayers who participated in the voluntary disclosure program. In this case, however, the Swiss intermediary must act in a cooperative manner by contacting clients, for instance, and requesting that they make a voluntary disclosure.
The roadmap also takes a stance on other central aspects of the tax conflict between Switzerland and Italy, particularly on the topics of cross-border commuters and the black list (from which Switzerland will only be removed once it has revoked tax privileges for certain Swiss companies), while recommending continued dialog between the parties on the topic of market access.
- Roadmap on the Way Forward in Fiscal and Financial Issues between Italy and Switzerland
- German article: Schweiz und Italien unterzeichnen Einigung in Steuerfragen
- General information on voluntary disclosure including country overview