Switzerland’s Secretariat for International Finance (SIF) has published its annual review on international financial and tax matters for 2020. With respect to tax-related matters in particular, the review includes the following:

Taxing the digital economy

At its meeting on 8 and 9 October 2020, the OECD‘s Inclusive Framework reviewed and then published blueprints on the tax challenges arising from the digital economy. A technical and political consensus was not reached. Switzerland took the opportunity to reaffirm its position on the subject: international companies should be taxed where added value is generated, new taxation rules should not impede growth and innovation, and tax competition must continue to be allowed within a fair framework.

Brexit

The bilateral agreements between Switzerland and the EU will no longer apply to the UK after it leaves the EU. On 30 June 2020, the two countries signed a joint statement on closer future cooperation in the area of financial services. The envisaged agreement should enable cross-border market access for a wide range of financial services relating to insurance, banking, asset management and capital market infrastructures.

Double taxation agreements (DTAs)

DTAs prevent double taxation. They are an important element in promoting international economic activities. Switzerland has DTAs with over 100 states and continues to expand this network. In 2020, protocols of amendment with Liechtenstein, Malta and Cyprus were signed. Moreover, the protocols of amendment with Ireland, Korea, the Netherlands, New Zealand, Norway, Sweden and Ukraine came into force. Finally, Switzerland took the necessary steps to amend the DTAs with Luxembourg, Lithuania and the Czech Republic via the BEPS convention.

Mutual agreement procedure

If double taxation occurs despite a DTA, or if there is a risk of such double taxation occurring, taxpayers resident in Switzerland can apply to SIF for a mutual agreement procedure. Most procedures concern European countries. In the reference year of 2019, 226 international mutual agreement procedures were completed in Switzerland.

Review of the implementation of international tax standards

Global Forum on Transparency and Exchange of Information

The Global Forum ensures that the international standards regarding transparency and the exchange of information for tax purposes are complied with and consistently implemented. On 6 April 2020, it published its report for Switzerland on the second round of the peer review of the exchange of information upon request. Switzerland was once again rated as “largely compliant”, but received recommendations in a few areas.

Inclusive Framework on BEPS

The Inclusive Framework on BEPS assesses the implementation of the BEPS minimum standards. In 2020, Switzerland was reviewed and obtained a good score for the exchange of country-specific information on large international companies (country-by-country reports) and for the spontaneous exchange of information on advance tax rulings, and was issued with three recommendations on tax rulings. Moreover, the OECD acknowledged the abolition, without an interim solution, of several tax regimes which are no longer accepted internationally, and which Switzerland abolished as part of the TRAF corporate tax reform. At the same time, it stated that the patent box solution introduced by Switzerland as a replacement was not harmful.

International tax standards

Automatic exchange of information

Switzerland has been implementing the global standard for the international automatic exchange of information in tax matters (AEOI) since 1 January 2017. At the end of September 2020, Switzerland exchanged AEOI data on more than 3 million financial accounts with 86 countries. On 11 November 2020, the Federal Council also put the amendment to the Federal Act on the International Automatic Exchange of Information in Tax Matters (AEOIA) and the associated ordinance into force with effect from 1 January 2021. In doing so, it took account of the Global Forum‘s recommendations on the Swiss AEOI legal basis.

Spontaneous exchange of information

Since 2018, Switzerland has been exchanging information on advance tax rulings within the framework of the spontaneous exchange of information based on the Administrative Assistance Convention. In 2020, around 800 exchanges of information on advance tax rulings took place with other countries. In addition, Switzerland was subject to a further review of the effective exchange of information (reference year: 2019).

Country-by-country reports

Within the framework of the Multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports, Switzerland has undertaken to exchange such reports from multinational companies with partner states. In 2020, the exchange of these reports took place with 57 partner states, and was mandatory for the first time.