Proposed changes to Swiss AEOI act and ordinance

20.03.2019

The Swiss Federal Council has recently announced a revision of the Swiss AEOI Federal Act and Ordinance. The most important changes are summarised in the following paragraphs. The announcement and proposed amended act and ordinance are available here.

Background

Following a review conducted by the Forum on Transparency and Exchange of Information for Tax Purposes (“Global Forum”), the Swiss Federal Council has initiated a consultation on a revision of the Swiss Federal Act and Ordinance (in the following collectively the “regulations”) on Automatic Exchange of Information in Tax Matters (“AEOI”). The aim of the revision is to implement the recommendations made by the Global Forum. The amendments are currently envisaged to come into force from 1 January 2021 (there are various transitional rules for each proposed measure). The consultation period lasts until 12 June 2019.

The proposed changes include in particular:

Classification of certain entities

Under the proposed amended regulations, the classification of certain entities for AEOI purposes is expected to change as follows:

  • Swiss associations (“Vereine”) and foundations (“Stiftungen”) will no longer be treated as non-reporting FIs. A detailed analysis will be required to confirm their classification as Reporting FIs going forward;
  • Swiss condominium owners’ associations (“Stockwerkeigentümergesellschaften”) and co-ownership associations (“Miteigentümergemeinschaften”), currently treated as Non-reporting FIs, will be treated as Non-Financial Entities (“NFEs”).
  • KPMG comment: We believe this to be the most significant change in the proposed amended regulations. Associations and foundations newly qualifying as Reporting FI will have to register with the Swiss Federal Tax Administration, implement due diligence processes, and report any reportable accounts.

Exempt accounts

The following accounts are exempt under the existing regulations. In the proposed amended regulations those exemptions no longer exist:

  • Accounts held by certain Swiss associations (“Vereine”) and Swiss foundations (“Stiftungen”);
  • Certain capital contribution accounts (“Kapitaleinzahlungskonten”). Under the proposed amended regulations, the exemption of those accounts is limited to a maximum period of 90 days, after which the account needs to be documented (and potentially reported) according to the normal AEOI procedures;
  • Accounts that are exempt based on the applicable regulations in the jurisdiction in which the account holder is resident.
  •  KPMG comment: Swiss FIs will be required to review these accounts to determine whether any of those account holders, or their Controlling Persons, are reportable under AEOI. Additional controls/monitoring may be required with regards to capital contribution accounts.

Procedures for new account openings

Under the existing regulations it is theoretically possible to open a new account without a self-certification, provided the self-certification is obtained within a period of 90 days. Further, it is possible for an FI to accept a self-certification if the only missing information on the form is the TIN.

The proposed amended regulations clarify that:

  • For each newly opened account a self-certification including a TIN (except in specific circumstances) is required before the account can be opened.
  • Where the FI can clearly determine based on publically available information that an entity account is non-reportable, a self-certification is, however, not mandatory. In addition, an account can only be opened without a self-certification in exceptional circumstances (i.e. insurance on another life with change of insuree due to legal succession, change of account holder due to court or official order), in which case the self-certification needs to be obtained and verified within a maximum of 90 days (the possible extension up to 1 year under the existing regulations is abolished). Where a self-certification is not provided within 90 days, the Swiss FI is required to close or freeze the account until the documentation has been provided.
  • KPMG comment: Under the proposed new regulations, Swiss FIs will need to review their account opening procedures to ensure they are in line with the amended requirements. Specifically, the documentation required for AEOI purposes needs to be collected upon opening of a new account, and appropriate steps need to be taken where the documentation cannot be obtained. Where an FI has opened new accounts between 1 January 2017 and 31 December 2020 for which a self-certification was accepted without a TIN, the FI needs to make reasonable efforts to obtain those TINs within two years.

Trustee Documented Trusts

The proposed amended regulations will provide that Trustee Documented Trusts need to be registered on the Swiss Tax Authorities AEOI Portal, including “TDT” in their name. The name of the trust, incl. the suffix “TDT”, also needs to be included in the trust’s CRS reporting.

  • KPMG comment: The new provisions only formalize the already existing common practice in the Swiss market.

Other new provisions

Other new provisions in the proposed amended regulations include:

  • A mandatory record retention period of 5 years for Swiss FIs;
  • Mandatory denomination of applicable account value thresholds in USD (not in CHF);
  • Certain changes to the residence address test for pre-existing accounts, clarifying that the residence address test can only be applied if the FI is in possession of supporting documentary evidence.
  • KPMG comment: Swiss FIs will need to review their policies and systems to ensure they comply with the amended record retention and currency requirements. The amendments do not apply retrospectively.

How KPMG can help

We have developed a range of services and tools to assist you with any aspects of AEOI compliance, including training, written policies & procedures, flowcharts, checklists, risk control matrices, the multi-jurisdiction KPMG AEOI Reporting Tool, healthchecks and other services.


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