Switzerland today started the process for an ordinance to put in place a mechanism for automatic exchange of tax information with India and other countries.
As part of global efforts to curb flow of illegal funds in the financial system, Switzerland has agreed to be part of the automatic tax information exchange framework.
The Swiss Federal Council today initiated the consultation on the ordinance on the International Automatic Exchange of Information in Tax Matters (AEOI Act).
The consultation process would be on till September 9.
In a release, Swiss government said the ordinance contains the Federal Council’s implementing provisions for the Federal Act on the AEOI Act.
“The ordinance mentions in particular other non-reporting financial institutions and exempt accounts, and regulates details with regard to the reporting and due diligence requirements for reporting Swiss financial institutions,” it said.
Besides, the ordinance has provisions that are required to implement the automatic exchange of information, including implementing provisions on the tasks of the Federal Tax Administration (FTA).
Having an automatic tax information exchange mechanism with Switzerland would help India in its clamp down on illicit fund flows.
Both countries have stepped up their cooperation on tax matters related to black money allegedly stashed by Indians there.
Almost 100 countries and territories, including India, have declared their intention to the Global Forum on Transparency and Exchange of Information for Tax Purposes to implement the AEOI standard.
“The AEOI should be introduced in 2017 so that the first exchange of data with selected partner states can take place from 2018,” the release said.
With respect to introduction of AEOI standard, the Swiss Federal Assembly adopted two agreements in December last year. They were the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (administrative assistance convention) and the Multilateral Competent Authority Agreement (MCAA).
According to the release, AEOI system must be activated bilaterally so that it can be introduced with a partner state.
So far, Switzerland has signed an agreement on the introduction of the AEOI with the European Union, as well as joint declarations on the basis of the MCAA with a number of other countries and territories, it noted.
In July 2014, the Organisation for Economic Cooperation and Development (OECD) Council adopted the new global standard for the international AEOI in tax matters.
Under the standards, certain financial institutions, collective investment vehicles and insurance companies collect financial information on their clients, so long as they are resident abroad for tax purposes.
The information covers all types of investment income and account balances and the same is automatically transmitted once a year to the tax authority, which transmits the data for the client to the respective tax authority abroad.
Having in place such a system is expected to prevent flow of illegal funds in the system and help keep overseas tax authorities better informed.