Bern and London initial new tax treaty

Switzerland and Britain have signed a new tax treaty for funds deposited by British residents into secret Swiss bank accounts.

Under the deal, money held by British resident accountholders will be subject to a tax of 19-34 per cent of the account balance, and a withholding tax will apply in the future, the Swiss finance ministry said in a statement.

The accord includes an up-front payment by Swiss banks of SFr500 million ($630 million), reimbursable if the authorities recoup enough back taxes owed to them.

From 2013 onwards, a withholding tax of 27-48 per cent will be applied, depending on the category of capital income. Rates will be slightly lower than the respective top tax rates in Britain.    

To prevent so-called “fishing expeditions” for tax evaders, Switzerland agreed Britain could request information on a client by submitting their name, but not necessarily the bank. No more than 500 such requests can be made in a year.    

The finance ministry said the treaty “respects the protection of bank clients’ privacy” and resolved the problems of the sale of stolen bank data and possible prosecution of bank employees.       

It comes two weeks after a similar accord was signed with Germany. The agreement will be signed by both governments in the next few weeks and must be endorsed by parliament. It is expected to enter into force in 2013.

The Swiss Bankers Association welcomed the accord as it enabled customers to get their affairs in order while also maintaining their privacy.