Regularization Of Undisclosed Assets In Switzerland And South Africa – Transparency On The Horizon

Author:Dr. Urs Feller, Danielle Wenger and Marcel Frey
Profession:Prager Dreifuss


The Organization for Economic Co-operation and Development ("OECD") Standard for Automatic Exchange of Financial Account Information in Tax Matters, which encompasses the Common Report- ing Standards ("CRS"), is designed to be a single global standard for the automatic exchange of finan- cial account information aimed at combatting offshore tax evasion and tax non-compliance.

Developments in Switzerland and South Africa

South Africa and Switzerland are amongst the many jurisdictions, which have committed themselves to implement the CRS. South Africa is one of the early adopters of the CRS and is committed to com- mence exchange of information from 2017.

Switzerland will exchange information from 2018, meaning that Swiss banks will be obliged to com- mence compiling financial information about the captured accounts as from the beginning of 2017. The Swiss Parliament has put in place all of the necessary legislation for the Swiss Federal Tax Ad- ministration to be ready to provide the sought information as from the beginning of 2018.

On November 24, 2016, the Swiss ambassador to South Africa and the South African Finance Minister signed a joint declaration expressing their intention to introduce the automatic exchange of information ("AEOI") in tax matters in 2018 and to exchange such information as from 2019 onwards.

Switzerland has already entered into agreements and joint declarations regarding CRS with the Euro- pean Union and states such as Australia, Canada, Norway, Japan, Jersey and Guernsey and is expected to commit to exchange information with various other countries. These agreements and declarations are made with reservation of the respective agreements and laws being signed and in force and with the following criteria: sufficient confidentiality and data protection provisions, information on imple- mentation of CRS in the respective country, appropriate rules on voluntary disclosure and strengthening of cooperation in the area of financial services.

The joint declaration with South Africa is a strong indication that Switzerland is convinced of South Africa's strong adherence to the principle of speciality and the safeguarding of confidentiality of the data delivered, both of which are prerequisites for the introduction of AEOI.

Double Taxation Agreement South Africa - Switzerland

In addition to the implementation of AEOI, it should be noted that there exists a double taxation agree- ment ("DTA") between South Africa and Switzerland enabling the countries to exchange information on request in cases of tax fraud. A request has to include, inter alia, the identity of the person concerned and a description of the information requested. If the request is granted and no appeal is lodged, the documents identified in the final order of the Swiss Federal Tax Administration ("SFTA") are trans- ferred to the requesting authority.

As from 2019 onwards, South African and Swiss tax authorities will be able to receive account foreign account information directly from each other without having to go the route of administrative assis- tance requests, which are frequently burdensome and their outcome legally uncertain. Until such time, requests based on the DTA will remain the only option for the tax authorities of the two countries to access overseas account information.

Regularization of assets by South African taxpayers

South Africa plays a leading role in the global movement towards greater transparency and exchange on information in tax matters to ensure international tax compliance. South African taxpayers who have not yet regularized their position with respect to their offshore assets should, therefore, be re- minded that the South African Revenue Service ("SARS") currently offers a Voluntary Disclosure Programme ("current VDP") for such purpose and recently announced a Special Voluntary Disclosure Programme ("Special VDP") which will apply for a limited window period which commenced on 1 October 2016.

Switzerland too is leading the way with regard to transparency. The Swiss government has committed itself to promoting a strategy of legitimate money ("Weissgeldstrategie") in the sense that it is making significant efforts to ensure tax conformity and prevent any misuse in connection with the banking secrecy. Switzerland's intention is to maintain its high reputation as a leading...

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