Tax policy – in line with international standards

Swiss five franc coins
Swiss five franc coins © FDFA, Presence Switzerland

After the conclusion of the Agreement on the automatic exchange of information (AEOI) in 2015 and the company taxation reform of 2019, relations between Switzerland and the EU with regard to taxation are more relaxed and back to normal. The AEOI agreement between Switzerland and the EU entered into force as of 1st of January 2017. This is in line with OECD standard. On 1st January 2020 the reform of company taxation that abolishes controversial tax regimes entered into force. With this, Switzerland implements the international standards.

Automatic exchange of information

Since 2005 Switzerland has already transferred over 3 billion euro to the Member States under the provisions of the agreement on the taxation of savings. In 2017, this agreement was replaced by the agreement on automatic exchange of information on tax matters, concluded in 2015. The latter is not only covering interests, but also dividends and other capital income and it doesn’t only affect persons with bank accounts, but also persons controlling foundations and trusts. Thereby, the new global OECD standard will be applied.  The AEI agreement is based on reciprocity, i.e. when exchanging account information, EU Member States have the same obligations to Switzerland as Switzerland has to the EU Member States. In September 2018, Switzerland automatically exchanged account data with EU Member States for the first time.

Corporate taxation

In October 2014, Switzerland and the EU agreed that Switzerland would abolish several tax regimes which are considered by the EU as distortive to competition.  The EU on the other hand was willing to waive counter-measures. After the failure of the referendum vote on the corporate tax reform III on 12 February 2017, the Swiss Government presented a new project as soon as possible in order to abolish several tax regimes and introduce measures that are compliant with the international standards. This was adopted by the Swiss voters on 19 May 2019, and entered into force as of 1st January 2020.

Switzerland implements the new international OEDC standard which was decided end of 2014 in the framework of the BEPS project (Base Erosion and Profit Shifting). Unjustified tax avoidance and profit shifting of multinational companies should be avoided by applying this standard. This standard also allows business locations to have the same conditions when it comes to tax bases.

The EU also decided on rules for the implementation of OECD standards in 2015 and 2016. The EU wants to consciously play a leading role and, in some instances, even go beyond the standards. By taxing foreign-controlled companies, this can lead to a discrimination of third countries; a point that Switzerland has raised several times and criticized in regards to the EU and its member states. The measures have been implemented in the Member States since 2019. The OECD is currently working on solutions for the tax challenges of the digitalised economy. Within this framework, Switzerland is advocating global and consensual measures. The EU wants to implement these measures in the future.

However, other EU tax projects that could have significant effects on Switzerland are also being monitored closely. These include, for example, the planned financial transaction tax, the common consolidated corporate tax base (CCCTB), the revision of the value added tax and the country-by-country reports.

The EU closely monitors whether third countries like Switzerland comply with the international tax standards. This particularly concerns standards regarding transparency, fair taxation and implementation of the Anti-Base Erosion and Profit Shifting (BEPS) measures.  In case of non-compliance Switzerland might be listed as a «non-cooperative tax jurisdiction». The EU included Switzerland on its so-called watch list in December 2017. After the approval of the corporate taxation reform, the EU decided however to remove Switzerland from their tax list on 10 October 2019.        

Anti-fraud agreement

The anti-fraud agreement of 2014 improves the collaboration between Switzerland and the EU and its Member States with regard to combatting smuggling as well as other crimes related to indirect taxation (for example custom duties, value added taxes and excise duties). It has not come into force as Ireland hasn’t ratified it yet, but it is being provisionally applied by most Member States since 2009.