Guidance on the Agreements on Cooperation in the Area of Taxation with Other States and the

144 Pages·2013·1.67 MB·English

Federal Department of Finance FDF

Swiss Federal Tax Administration FTA
Main Division for Federal Direct Tax,
Anticipatory Tax and Stamp Duty
November 2013

Guidance on the Agreements on Cooperation in the
Area of Taxation with Other States and the Federal
International Withholding Tax Act (IWTA)

Levying of final withholding tax and voluntary disclosure

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Contents
Abbreviations ............................................................................................................. 8
1 Introduction ................................................................................................. 10
1.1 Purpose ................................................................................................................. 10
1.2 Scope of application: subject matter .................................................................. 10
1.3 Geographical scope ............................................................................................. 11
1.4 Time scope ............................................................................................................ 11
1.5 Consultations ........................................................................................................ 11
1.6 Relevant authority ................................................................................................ 11
2 The Swiss paying agent ............................................................................. 11
2.1 Qualification as a Swiss paying agent ................................................................ 11
2.2 Exceptions ............................................................................................................ 12
2.3 Registration and de-registration .......................................................................... 12
2.4 Record keeping ..................................................................................................... 13
2.5 Tasks ..................................................................................................................... 13
2.6 Chains of paying agents ...................................................................................... 13
2.7 Duties to provide advice and cooperate ............................................................. 13
3 Relevant person .......................................................................................... 14
3.1 Conditions ............................................................................................................. 14
3.1.1 United Kingdom territory ......................................................................................... 14
3.1.2 Austrian territory ..................................................................................................... 14
3.2 Beneficial ownership ............................................................................................ 15
3.2.1 Determining and documenting beneficial ownership ............................................... 15
3.3 Contracting party is a natural person ................................................................. 15
3.3.1 Basic principle ........................................................................................................ 15
3.4 Contracting party is a domiciliary company for the purposes of the
Agreements ........................................................................................................... 16
3.4.1 Contracting party is a corporation deemed to be a domiciliary company for the
purposes of the Agreements ................................................................................... 16
3.4.1.1 Basic principle ...................................................................................................... 16
3.4.1.2 Corporations: Examples ....................................................................................... 16
3.4.2 Contracting party is the trustee of a trust or a (family) foundation ........................... 17
3.4.2.1 Trust/(family) foundation: revocable and discretionary/non-discretionary .............. 17
3.4.2.2 Trust/(family) foundation: irrevocable and non-discretionary ................................. 17
3.4.2.3 Trust/(family) foundation: irrevocable and discretionary ........................................ 18
3.4.3 Contracting party is an "underlying company" of a trust or of a (family) foundation . 18
3.4.4 Exceptions .............................................................................................................. 18
3.5 Special cases ........................................................................................................ 19
3.5.1 Usufruct .................................................................................................................. 19
3.5.2 Assets transferred as collateral ............................................................................... 19
3.5.3 Fiduciary relations ................................................................................................... 19
3.5.4 Counter transactions ............................................................................................... 19
4 Identity and place of residence of relevant persons ................................ 19
4.1 Basic principle ...................................................................................................... 19
4.2 Special cases ........................................................................................................ 20
4.3 Certificate of residence ........................................................................................ 21
4.4 Collective relations, joint relations, multiple beneficial owners ........................ 22
4.5 Transitional provisions ........................................................................................ 22
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4.5.1 Basic principle ........................................................................................................ 23
4.5.2 Ongoing calculation of final withholding tax ............................................................. 23
4.5.2.1 Transaction chains ............................................................................................... 23
4.5.2.2 Loss carryforwards ............................................................................................... 23
4.5.2.3 Changing scenarios: a beneficial owner joins a relation ........................................ 23
4.5.2.4 Changing scenarios: a beneficial owner leaves a relation ..................................... 23
4.5.3 Inheritance .............................................................................................................. 24
4.6 Inheritance ............................................................................................................ 24
5 Assets .......................................................................................................... 24
5.1 Basic principle ...................................................................................................... 24
5.2 Assets not qualifying for the purposes of the Agreements ............................... 24
5.3 Corporate actions to be taken into account ....................................................... 25
5.3.1 Basic principle ........................................................................................................ 25
5.3.2 Exceptions .............................................................................................................. 25
5.4 Dormant accounts ................................................................................................ 25
6 Insurance transactions ............................................................................... 25
6.1 Assets .................................................................................................................... 25
6.2 Relevant person .................................................................................................... 26
6.2.1 Provisions to the Agreement with Austria ................................................................ 26
6.2.2 Provisions to the Agreement with the United Kingdom ............................................ 26
6.3 Income related to insurance transactions .......................................................... 26
7 Provision of data ......................................................................................... 27
7.1 Data providers ...................................................................................................... 27
7.2 Information submitted .......................................................................................... 27
8 Withholding tax on capital income - United Kingdom (UK) ..................... 27
8.1 Withholding tax ..................................................................................................... 27
8.1.1 Tax rates ................................................................................................................ 27
8.1.2 Finality .................................................................................................................... 28
8.1.3 Amendments of tax rates ........................................................................................ 28
8.2 Taxation principles ............................................................................................... 28
8.2.1 Relevant date ......................................................................................................... 28
8.2.2 Relevant currency and rounding ............................................................................. 28
8.2.3 Basis of assessment ............................................................................................... 28
8.2.4 Acquisition costs and sequence for the purpose of capital gains ............................. 29
8.2.5 Set off of losses and carry forward .......................................................................... 30
8.2.6 Crediting of withholding taxes ................................................................................. 30
8.2.7 Currency gains ....................................................................................................... 30
8.2.8 Fiduciary arrangements .......................................................................................... 30
8.2.9 Compensation for damages .................................................................................... 30
8.3 Table of Concordance .......................................................................................... 31
8.3.1 General provisions .................................................................................................. 31
8.3.2 Corporate actions regarding shares ........................................................................ 31
8.3.3 Corporate actions regarding bonds ......................................................................... 36
8.3.4 Corporate actions regarding options ....................................................................... 38
8.3.5 Corporate actions regarding structured products .................................................... 40
8.3.6 Corporate actions regarding UK authorised investment funds and other UK funds . 42
8.3.6.1 Distributions from Authorised Investment Funds ................................................... 42
8.3.6.2 Further corporate actions ...................................................................................... 43
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8.3.7 Corporate actions regarding non-UK funds ............................................................. 44
8.3.7.1 Distributions from reporting funds ......................................................................... 44
8.3.7.2 Distributions from non-reporting funds .................................................................. 44
8.3.7.3 Undistributed income from reporting funds ........................................................... 45
8.3.7.4 Undistributed income from non-reporting funds .................................................... 46
8.3.7.5 Disposal and redemption of holding in a reporting fund ........................................ 46
8.3.7.6 Disposal and redemption of holding in a non-reporting fund ................................. 46
8.3.7.7 Further actions ..................................................................................................... 46
8.3.8 Glossary ................................................................................................................. 46
8.4 Non-UK domiciled individuals ............................................................................. 51
8.4.1 Certification of "non-UK domiciled individuals" status.............................................. 51
8.4.2 Step 1 ..................................................................................................................... 51
8.4.2.1 Declaration of intent .............................................................................................. 51
8.4.2.2 No declaration of intent ......................................................................................... 52
8.4.3 Step 2 ..................................................................................................................... 55
8.4.3.1 Certification of status as a non-UK domiciled individuals ...................................... 55
8.4.3.2 Special case ......................................................................................................... 57
8.5 Self-assessment taxation ..................................................................................... 57
9 United Kingdom tax finality payment ........................................................ 58
9.1 General provisions ............................................................................................... 58
9.2 Tax finality payment ............................................................................................. 58
9.2.1 Tax rate and basis of assessment .......................................................................... 58
9.2.2 Amendments of tax rates ........................................................................................ 58
9.2.3 Tax finality .............................................................................................................. 58
9.2.4 Basis of assessment ............................................................................................... 58
9.3 Administrative issues ........................................................................................... 59
9.3.1 Transfer of payments by the paying agents to the FTA ........................................... 59
9.3.2 Account periods ...................................................................................................... 59
9.3.3 Currency and rounding ........................................................................................... 59
9.3.4 Certificate ............................................................................................................... 59
10 Withholding tax on capital income Austria (AT) ...................................... 59
10.1 Tax rates ................................................................................................................ 59
10.1.1 Tax finality .............................................................................................................. 59
10.1.2 Amendments of tax rates ........................................................................................ 60
10.2 Taxation principles ............................................................................................... 60
10.2.1 Date of receipt of income ........................................................................................ 60
10.2.2 Relevant currency and rounding ............................................................................. 60
10.2.3 Basis of assessment ............................................................................................... 60
10.2.4 "Grandfathering" regulations ................................................................................... 60
10.2.5 Determination of acquisition costs .......................................................................... 61
10.2.6 Alternative assessment basis.................................................................................. 61
10.2.7 Transfer to an account or deposit of a third party .................................................... 61
10.2.8 Offsetting of losses ................................................................................................. 62
10.2.9 Crediting of withholding taxes ................................................................................. 62
10.2.10 Compensation for damages .................................................................................... 62
10.3 Table of concordance ........................................................................................... 62
10.3.1 General provisions .................................................................................................. 62
10.3.2 Corporate actions regarding shares ........................................................................ 63
10.3.3 Corporate actions regarding bonds ......................................................................... 67
10.3.4 Corporate actions regarding options ....................................................................... 70
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10.3.5 Corporate actions regarding structured products .................................................... 71
10.3.6 Corporate actions regarding funds .......................................................................... 74
10.3.6.1 Distributions and deemed distributions of income by Austrian funds ..................... 74
10.3.6.2 Distributions by non-Austrian investment funds .................................................... 75
10.3.6.3 Year-end processing for non-Austrian investment funds ....................................... 76
10.3.6.4 Buying and selling of fund units ............................................................................ 77
10.3.6.5 Further investment fund issues ............................................................................. 77
10.4 Transactions in precious metals and commodities ........................................... 78
10.4.1 Direct investments in precious metals and commodities ......................................... 78
10.4.2 Precious metals accounts ....................................................................................... 78
10.4.3 Precious metals certificates .................................................................................... 78
10.5 Self-assessment taxation ..................................................................................... 78
11 Relationship to other taxes ........................................................................ 79
11.1 Basic principles .................................................................................................... 79
11.1.1 Special cases UK .................................................................................................... 79
11.1.2 Special cases for Austria ........................................................................................ 79
11.2 Settling final withholding tax ............................................................................... 79
11.3 Swiss anticipatory tax .......................................................................................... 80
11.3.1 Basic principle ........................................................................................................ 80
11.3.2 Special cases ......................................................................................................... 82
11.4 Foreign withholding taxes ................................................................................... 83
11.4.1 Residence state is the same as source state .......................................................... 83
11.4.2 DTA between residence state and source state ...................................................... 83
11.4.3 Refund methods ..................................................................................................... 84
11.4.4 No DTA between residence state and source state ................................................ 85
11.5 EU Savings Agreement ........................................................................................ 86
11.5.1 Basic principle ........................................................................................................ 86
11.5.2 Technical aspects of the interaction between the tax retention under the EUSA and
the final withholding tax – sequence of the process steps ....................................... 87
11.5.3 Procedure for reducing the tax burden of the retention concerning relevant persons
from Austria ............................................................................................................ 88
12 Processing issues with regard to the levying of withholding taxes on
capital income ............................................................................................. 89
12.1 Forms .................................................................................................................... 89
12.1.1 Accounting periods ................................................................................................. 89
12.1.2 Currency and rounding ........................................................................................... 89
12.2 Deadlines............................................................................................................... 89
12.2.1 Due date for taxes .................................................................................................. 89
12.3 Levying of a too high or too low amount ............................................................ 89
12.4 Certificates ............................................................................................................ 90
12.4.1 Annual certificates or certificates issued when ending a banking relation ............... 90
12.4.2 Loss certificates ...................................................................................................... 90
12.5 Change of paying agent ....................................................................................... 90
12.6 Collective relations and joint accounts ............................................................... 91
13 Disclosure of capital income ..................................................................... 92
13.1 The reporting procedure ...................................................................................... 92
13.1.1 Authorisation ........................................................................................................... 92
13.1.2 Changing from the levying of the withholding tax to the disclosure procedure ......... 92
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13.1.3 Moving in or out of the sovereign territory of a partner state ................................... 93
13.2 The disclosure form ............................................................................................. 93
13.2.1 Content of the disclosure: Austria ........................................................................... 93
13.2.2 Content of the disclosure: UK ................................................................................. 93
13.2.3 Capital income ........................................................................................................ 94
13.2.4 Accounting periods ................................................................................................. 94
13.2.5 Currency and rounding ........................................................................................... 94
13.3 Collective relations and joint accounts ............................................................... 94
13.4 Refund of Swiss anticipatory tax ......................................................................... 95
13.5 Deadlines............................................................................................................... 95
13.5.1 United Kingdom ...................................................................................................... 95
13.5.2 Austria .................................................................................................................... 95
13.5.3 Cancellation of a disclosure .................................................................................... 95
13.6 Incorrect disclosure ............................................................................................. 95
13.7 Certificate .............................................................................................................. 96
14 Inheritance ................................................................................................... 96
14.1 United Kingdom .................................................................................................... 96
14.1.1 Definition of authorised person ............................................................................... 96
14.1.2 Freezing of assets .................................................................................................. 96
14.1.3 Tax ......................................................................................................................... 98
14.1.3.1 Levying of tax ....................................................................................................... 98
14.1.3.2 Basis of assessment ............................................................................................. 98
14.1.3.3 Transfer by the paying agents to the FTA ............................................................. 99
14.1.3.4 Certificate ............................................................................................................. 99
14.1.3.5 Finality .................................................................................................................. 99
14.1.3.6 Wrongly levied tax ................................................................................................ 99
14.1.4 Disclosure ............................................................................................................. 100
14.1.4.1 Voluntary disclosure ........................................................................................... 100
14.1.4.2 Disclosure due to insufficient funds .................................................................... 100
14.1.4.3 Content of the disclosure .................................................................................... 100
14.1.4.4 Transfer by the paying agent to the FTA ............................................................. 100
14.1.4.5 Certificate ........................................................................................................... 101
14.1.4.6 Correction of a disclosure ................................................................................... 101
15 Audits ......................................................................................................... 101
15.1 General provisions ............................................................................................. 101
15.2 Rights and duties of the FTA and the paying agents ....................................... 101
15.3 Areas audited by the FTA ................................................................................... 102
15.4 Frequency ........................................................................................................... 102
15.5 Reporting............................................................................................................. 103
16 Legal procedure ........................................................................................ 103
16.1 Procedure between the FTA and a paying agent .............................................. 103
16.2 Procedure between a paying agent and the relevant person or another paying
agent .................................................................................................................... 103
16.3 Limitation ............................................................................................................ 104
16.4 Penal provisions ................................................................................................. 104
17 Safeguarding the Agreement's purpose ................................................. 104
17.1 Content of the information request ................................................................... 104
17.2 Duties of the bank or the registered paying agent ........................................... 105
17.3 Informing the person entitled to appeal ............................................................ 105
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17.4 Procedure ............................................................................................................ 106
Appendices ............................................................................................................ 107

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Abbreviations
AMLA Swiss Federal Act of 10 October 1997 on Combating Money Laundering and
Terrorist Financing in the Financial Sector (SR 955.0)
BMF Federal Ministry of Fincance (Austria)
CDB Swiss banks’ code of conduct with regard to the exercise of due diligence
CFM Corporate Finance Manual
CGM Capital Gains Manual
CHF Swiss Franc (currency)
CISA Swiss Federal Act of 23 June 2006 on Collective Investment Schemes
(SR 951.31)
CTA10 Corporation Tax Act 2010
CTM Company Taxation Manual
DBG Swiss Federal Act of 14 December 1990 on Direct Federal Tax (SR 642.11)
DVS Main Division DVS
DTA Double Taxation Agreement
EStG Austrian Income Tax Act
EU European Union
EUSA Agreement dated 26 October 2004 between the Swiss Confederation and the
European Community providing for measures equvialent to those laid down in
Council Directive 2004/48/EC on taxation of savings income in the form of in-
terest payments (EU Savings Agreement)
EUR Euro (currency)
FDF Federal Department of Finance
FIFO First in first out
FTA Federal Tax Administration
GBP British pound sterling (currency)
HMRC Her Majesty’s Revenue and Customs
ICVC Investment company with variable capital
ICFC Investment company with fixed capital
IWTA Swiss Federal International Withholding Tax Act (SR 672.4)
ITA07 Income Tax Act 2007
ITTOIA05 Income Tax (Trading and Other Income) Act 2005
OFM Offshore Fund Manual
SAIM Savings and Investment Income Manual
SBA Swiss Bankers Association
SFA Swiss Funds Association
SR Systematic collection of Federal Law
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TCGA92 Taxation of Chargeable Gains Act 1992
TIOPA 2010 Taxation (International and Other Provisions) Act 2010
UCITS Undertaking for collective investment in transferrable securities (see Directive
85/611/EEC)
VStG Swiss Federal Act of 13 October 1965 on Withholding Tax (SR 642.21)
VwVG Swiss Federal Act of 20 December 1968 on Administrative Procedure (SR
172.021)
WL-EUZ Guidance on EU taxation of savings income (tax retention and voluntary dis-
closure)
ZBstG Swiss Federal Act of 17 December 2004 on the Agreement on the Taxation of
Savings Income with the European Community (SR 641.91)

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1 Introduction
1.1 Purpose
1. This Guidance provides Swiss paying agents with an overview of the duties incumbent on
them under
a) the Agreements on cooperation with foreign states in the area of taxation which the
Swiss Confederation has entered into with various states;
b) and the Federal International Withholding Tax Act (IWTA), which regulates the im-
plementation thereof.
2. The application of the Agreements is intended to ensure effective taxation of capital income
on assets booked with a Swiss paying agent where the beneficial owner is a relevant person
as defined in the Agreements. The main provisions of the Agreements are as follows:

a) assets booked with a Swiss paying agent where the beneficial owner is a relevant
person are regularised for tax purposes;

b) either a withholding tax is levied to satisfy the tax liability on capital income (income
and capital gains) generated after the entering into force of the Agreements and
where the beneficial owner is a relevant person or the said income is disclosed.

3. This Guidance deals in particular with the levying of the final withholding tax and voluntary
disclosures.
4. A second Guidance deals with regularisation of assets by subsequent taxation or disclosure.
5. Both Guidances may be amended by the FTA if necessary.
6. Where the Guidances provide different definitions of terms, these shall each only apply within
the respective set.
1.2 Scope of application: subject matter
7. This Guidance deals with the levying of final withholding tax on income and capital gains on
assets held at a Swiss paying agent by persons resident in the partner states.
8. This Guidance covers the following areas:
a) Levying a final tax on capital income (income and capital gains);
b) Disclosure of capital income;
c) Levying final tax on assets involved in cases of inheritance;
d) Disclosure of cases of inheritance;
e) Levying a tax finality payment on interest income that has been subject to a tax re-
tention under the EU Savings Agreement (EUSA).
9. The Agreements do not apply to income or gains that have been subject to a tax retention
under the EUSA or where voluntary disclosure is made. References to the EUSA are to the
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