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Swiss banks to police clients' overseas taxation

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10:21 CET+01:00

In future, Swiss banks may require their overseas customers to provide proof that any funds held in Swiss accounts have been taxed correctly in the client’s country of tax domicile.

The Department of Finance is looking once more at a proposal for a new banking model, similar to that already operational in Liechtenstein.

The Federal Council is hoping that the new model would prevent banks from being confronted later with additional duties.

Nevertheless, the Swiss Bankers’ Association is sceptical about burdening the banks with policing duties, newspaper Neue Zürcher Zeitung reported on Tuesday.

The question of the appropriate level of proof required from the client is still unresolved. The solution may depend on the client’s country of origin.

Provision of a copy of the previous tax return showing that the relevant assets have been declared, or a letter of confirmation from a registered tax advisor would certainly meet the standard.

However, the solution may simply be to require clients to make a declaration that all their assets are tax compliant with their country of tax domicile. Such a declaration would reduce the cost to the client, as well as to the bank.

Compliance departments would then have just one more box to tick in their assessment of the new account, rather than having to critically review any evidence provided.

However, while attractive on the one hand, the introduction of such a system could still leave the way open for tax cheats to take advantage, simply by providing falsified forms to the banks.

Under the Liechtenstein-UK agreement, the Liechtenstein fiduciary first requests the confirmation that the accounts are declared.

The client must then send evidence supporting the claim within 18 months, either in the form of a copy of a tax return or confirmation from a tax advisor, as well as proof that the individual has registered with the Liechtenstein Disclosure Facility.

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