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German Cabinet Adopts Swiss Tax Deal

Monday, April 30, 2012

The German cabinet has recently adopted the bill implementing the bilateral tax agreement with Switzerland.

Describing the bilateral tax treaty as a 'landmark' in Swiss-German relations, the German finance ministry said that the deal will ensure the equal treatment of the wealth of German citizens, whether located in Germany or in Switzerland, and will restore tax equity for the past by means of a lump sum taxationt.

Following significant concessions from Switzerland, the cornerstones of the agreement are now as follows:

  • Following entry into force of the treaty, the capital deposits of German taxpayers located in Switzerland will be taxed at the same rate as applied to capital investments in Germany;
  • In the future, German heirs will either agree to a 50% tax levied on inheritances, or to a full disclosure;
  • The taxation of wealth will in future be assured by means of an exchange of tax information, which goes beyond the international Organization for Economic Cooperation and Development (OECD) standards, to ensure that no new deposits of undeclared wealth are hidden in the Confederation;
  • As regards the past, German residents can opt either for a flat tax imposed on capital or to submit a self-declaration. Otherwise, cases will be pursued; and
  • If German taxpayers relocate wealth from the Confederation to a third country, Germany will be able to obtain information from Switzerland regarding the precise flow of money, following entry into force of the treaty.
  • According to the German finance ministry, the agreement will serve to generate tangible fiscal revenues for the federal government, federal states and communes, noting that the federal states will receive a significant portion of the revenues.

    A first instalment of CHF2bn (USD2.2bn) is due to be paid to the German state directly following entry into force of the accord.

    Defending the agreement as the best and most comprehensive means of resolving the situation, the ministry underscores that the purchase of tax data discs was not a viable solution in the long-term.

    The ministry warns that failure to implement the agreement would be the worst outcome for all parties involved, as millions of irretrievable tax assets would continue to be lost every year.