Following the conclusion of an agreement on the automatic exchange of information in 2015 and the 2019 corporate tax reform, relations between Switzerland and the EU in the tax area have notably relaxed and finally normalized. The agreement on the automatic exchange of information between Switzerland and the EU entered into force on January 1, 2017, in accordance with the OECD standards. On January 1, 2020, the Federal Law on Tax Reform and the Financing of the AHV (RFFA), came into force, putting an end to certain tax regimes considered as distorting competition. Switzerland will therefore apply the international standards in force for corporate taxation.
Automatic exchange of information
Since 2005, Switzerland has paid more than three billion euros to member countries under the agreement on the taxation of savings income with the EU. As of 2017, this agreement has been replaced by the agreement on the automatic exchange of information in tax matters concluded in 2015. The latter covers not only interest, but also dividends and other capital income and does not only concern persons with bank accounts, but also persons controlling foundations and trusts. This is an implementation of the new OECD global standard. The agreement on the automatic exchange of information was designed to be reciprocal: the member states therefore have the same responsibilities as Switzerland with regard to the exchange of information on bank accounts. In September 2018, Switzerland exchanged bank data with EU member states for the first time.
Switzerland and the EU agreed in October 2014 that Switzerland would abolish certain tax regimes considered to distort competition. As a result, the EU has declared its readiness to forego possible countermeasures. After the failure of the third corporate tax reform (RIE III) in a popular vote, the Swiss government presented a new project aiming to abolish certain tax regimes by measures in line with international standards. The tax project was accepted by the Swiss people in the vote of May 19, 2019, and entered into force on January 1, 2020.
Switzerland implements the international OECD standards adopted at the end of 2014 as part of the BEPS project ("Base Erosion and Profit Shifting"). This reform aims to avoid illegal tax evasion as well as profit shifting by multinational companies. The new standard also helps to ensure that all financial and economic centers are on an equal footing in terms of tax bases.
In 2015 and 2016, the EU also adopted new rules for the implementation of the OECD standards. It wants to play a pioneering role and even go beyond certain standards. The taxation of foreign-controlled establishments in third countries can lead to discrimination, an issue that Switzerland has repeatedly raised with the European Commission and member states. The measures have been implemented in the member states since 2019.
In 2021, some 137 states also agreed on the outline of a solution to the tax challenges of the digitalized economy. This solution includes a partial redistribution of tax rights to states with large markets (pillar 1) and a global minimum tax for multinationals (pillar 2). In this context, Switzerland is committed to comprehensive and consensual measures. Both Switzerland and the EU want to implement this two-pillar reform as soon as possible.
Other EU tax projects may have a significant impact on Switzerland. In 2021, for example, the EU has agreed on a country-specific public consultation for multinational companies. European subsidiaries of Swiss companies are also affected by this provision. Another example of a measure that indirectly affects Switzerland is the project to prevent the abuse of so-called "letterbox companies" for tax purposes in the EU.
The EU is closely monitoring the implementation of international standards by third countries such as Switzerland, in particular with regard to transparency, fair taxation and the application of BEPS measures. Failure to do so could result in Switzerland being classified as a "non-cooperative tax jurisdiction". Since December 2017, Switzerland was on the EU watch list. After the acceptance of the corporate tax reform, the EU decided on 10 October 2019 to remove Switzerland from this list.
The anti-fraud agreement of 2004 improves cooperation between Switzerland, the EU and its member states in the fight against smuggling and other offences in the area of indirect taxes (e.g. customs duties, value added tax and consumption taxes). The agreement has not yet entered into force, as Ireland has not yet ratified it, but it has been provisionally applied by most member states since 2009.