Switzerland and Italy reach agreement in principle on tax issues
Bern, 16.01.2015 - Switzerland and Italy have reached an agreement in principle on future cooperation in tax matters. The two governments are currently preparing the signature of a Protocol of Amendment to the double taxation agreement, as well as a roadmap with parameters. Both documents should be signed before the deadline of 2 March 2015 set for Italy's voluntary disclosure programme. The agreement will improve relations between Switzerland and Italy with regard to financial and tax matters after years of controversy and simplify the regularisation of untaxed assets before the automatic exchange of information is introduced.
The agreement between Switzerland and Italy was initialled on 19 December 2014. At present in Switzerland, the cantons and business associations are being heard as prescribed by law before the signing, which should take place by the end of February.
It was possible for the stated objectives to be achieved during the negotiations:
- Orderly transition to the future automatic exchange of information, i.e. simplified regularisation of Italian bank clients' assets without massive outflows of capital and reduced risks arising from legal proceedings for banks and their employees
- Removal of Switzerland from Italian black lists as soon as possible
- Improvement of the double taxation agreement between Switzerland and Italy, transfer to the OECD standard for the exchange of information upon request
- Improvement in the cross-border commuters agreement
- Improvement in market access for financial service providers
The double taxation agreement (DTA) between Switzerland and Italy is to be supplemented by a protocol that makes provision for the OECD standard for the exchange of information upon request. After it has been brought into force, it should apply for circumstances from the date of signing - as is the case with several agreements with other countries.
Aside from the Protocol of Amendment to the DTA, the negotiations have enabled a roadmap to be concluded. This contains a clear political commitment to several aspects of bilateral relations in the area of taxation and finance. The roadmap will be published at the time of the signing of the Protocol of Amendment to the DTA. It contains the following in particular:
- Automatic exchange of information: The OECD standard is to be introduced between Switzerland and Italy in the future with a new legal basis.
- Regularisation of the past: Italian taxpayers with an account in Switzerland can take part in the Italian voluntary disclosure programme (VDP) under the same conditions as those in other countries that are not on a black list. Both countries can make group requests to identify persons who wish to conceal untaxed assets. The OECD standard applies in this respect; fishing expeditions are not permitted.
- Prosecution of taxpayers as well as financial institutions and their employees: Taxpayers who participate in the VDP get a reduced penalty. Financial institutions and their employees are not responsible for the tax offences of their clients in principle. Financial institutions' cooperative behaviour with the regularisation of their clients will be looked upon favourably.
- Further amendment of the DTA between Switzerland and Italy: In a second stage, it will be sought to reduce the tax rates on dividends and interest payments, amend the abuse provision and include an arbitration clause.
- Taxation of cross-border commuters: In the future, cross-border commuters should be subject to reduced taxation in the state where they work as well as regular taxation in their country of domicile. The proportion in the state of work will be a maximum of 70% of the total withholding tax. The total tax burden of cross-border commuters will not be lower than at present with these new regulations, and initially it will not be higher either. The new taxation of cross-border commuters should be the subject of an agreement to be negotiated in the first half of 2015. Both sides have undertaken to ensure swift negotiations.
- Italian black lists: With the entry into force of the Protocol of Amendment to the DTA, Switzerland will be removed from lists that are based solely on the absence of the exchange of information. The special regimes for corporate taxation that are currently on Italian black lists will be removed from these lists once they have been abolished or adjusted to bring them into line with international standards.
- Financial market access: Both sides confirmed their intention to seek ways of enhancing cross-border cooperation and financial market access. Technical discussions in this regard will commence soon.
- Campione d'Italia: The competent authorities will pursue the discussions in order to find pragmatic solutions for individual aspects of indirect taxes in the short term, as well as to find solutions for the other tax and non-tax issues in the longer term.
After years of controversy, this agreement between Switzerland and Italy is laying new foundations that will make it possible to strengthen cooperation, improve relations between the two countries and develop bilateral economic relations in a constructive atmosphere. The agreement will facilitate the processing of the Italian voluntary disclosure programme recently adopted by Italy's parliament and will considerably increase legal certainty for Italian taxpayers who have an account in Switzerland. This will provide Ticino's financial centre with continued good prospects.
Address for enquiries
Mario Tuor, Head of SIF Communications
Tel. +41 58 462 46 16
Federal Department of Finance
Last modification 03.10.2018