Goodbye, banking secrecy

In December 2015, Switzerland, Liechtenstein, Luxembourg, the Cayman Islands, Austria, Germany, and 55 other countries adopted an agreement on the automatic exchange of financial account information.

Starting in 2016, tax authorities will have access to sensitive financial data from companies and individuals, and this process will even be automated. Until now, requests to foreign tax authorities were cumbersome and time-consuming. They often came to nothing because many countries invoked banking secrecy and refused to provide information. Effective immediately, the signatory countries are required to share information about financial accounts held by individuals residing abroad with the respective countries of residence. Specifically, this includes:

• Name, address, tax identification number, date of birth, and place of birth

• Account number

• Account balance at year-end or on the date of closure

• Credited investment income, dividends, and proceeds from sales

Information for the year 2016 is to be reported automatically once a year to the tax authorities of the country of residence starting in 2017. The international agreement is intended to combat cross-border tax fraud and tax evasion. This is because the increasing ability to invest capital internationally, combined with the previous lack of tax transparency between countries, has heightened the risk of incorrect taxation. This is to be addressed through the timely exchange of tax-related information.

Attention

The data is already being collected. Anyone who thinks they have until 2017 to ensure their tax compliance is mistaken. Although the data exchange will not take place until sometime in 2017, the reports will already cover tax data from 2016. However, if you have any uncertainties, we advise against panicking or making hasty voluntary disclosures. Please contact us; we would be happy to advise you on this matter.