Switzerland Is Recommended To Rectify Withholding Tax Rules

; posted on
June 13th, 2018

The Swiss Federal Council was informed about the recommendation on a reform of withholding tax from the advisory board for the future of the Swiss financial centre.

Three Options

In order to strengthen the Swiss capital market by means of reform, there are three basic options proposed:

  • Abolition of withholding tax: to abandon the withholding tax domestically. If the cancellation is limited to bond interest, the direct shortfall in withholding tax would be acceptable. This measure, however, would favour domestic tax evasion.
  • Conversion of the withholding tax to paying agent principle: the proposed withholding tax system will differ from the current system, which imposes the liability to pay to the paying agents. The tax on bond interest can be levied only on domestic nature person whose backup is required. Other domestic investors as well as foreign investors can be exempted from the tax. The resulting shortfall in income is likely to result in a good cost-benefit ratio.
  • A reporting system based on paying agent principle: messages are to be sent to the tax authority for international automatic exchange of information. The tax secrecy would be preserved since the bank would only transmit information to the tax authorities.

Unanimous Recommendation

The advisory board for the future of the Swiss financial centre unanimously recommends a swift reform that differentiates the withholding tax on bonds and money market paper, thereby freeing domestic institutional investors and foreign investors. The withholding tax should be designed as a paying agent tax and applied to all resident individuals in Switzerland. This tax should be designed to minimize the administrative and liability risks for financial institutions.

Source: The Swiss Federal Council

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