The deal, which will see Swiss banks make an advance payment of CHF2bn ($2.69bn, €1.77bn) to the German exchequer, will require Germans with Swiss bank accounts to pay a withholding tax set at between 19% and 34% of the amount held, depending on the length of time the account has been open. The assessment period of the withholding tax will begin in 2000.
While not the CHF10bn the German government had hoped to recoup, the deal is nonetheless a significant step for both the Swiss, which do not want to jeopardise their country’s strict secrecy laws, and the Germans, who finally have a resolution to the issue with real financial gain.
The deal is particularly important as it is expected to be replicated with the UK.
Under the new rules, Germans with undeclared Swiss bank accounts will have to pay a withholding tax comparable to the German flat income tax (Abgeltungssteuer). The applicable tax rate amounts to 26.375% which is equal to the flat income tax rate of 25% plus a 5.5% “solidarity” surcharge.
This withholding tax will satisfy the German tax obligation on the funds in question and, once the total amount of withholding taxes has been withheld and remitted by the bank, no further tax obligations will apply. In particular, no declaration on the bank client’s personal income tax return is necessary – therefore continuing to give the client anonymity.
The amount of withholding taxes will be remitted by the Swiss bank to the German tax authorities and the bank client will receive a respective tax certificate issued by his bank in order to provide evidence of proper taxation.
In addition to the new withholding tax, the Swiss have also agreed to new “simplified detection rules”, under which it will be much easier for the German authorities to identify and prosecute those with undeclared assets.
