The automatic exchange of information (AEOI)
The purpose of AEOI is to help prevent tax evasion through the holding of assets abroad.
Under the provisions of AEOI, financial institutions, particularly banks such as St.Galler Kantonalbank AG (SGKB), but also other Swiss financial institutions such as insurance companies and investment entities, have to gather financial information about clients with a tax residence abroad. Each year, they must then report this information to the relevant authorities in the client's jurisdiction of residence via their national tax authority. This document provides information about AEOI and explains what the global standard means for you.
Reporting Financial institutions such as SGKB are obliged to annually report the relevant information (see question 4) about reportable clients (see question 3) to the Swiss Federal Tax Administration (SFTA). The SFTA then forwards this information to the tax authorities of the reportable persons’ jurisdictions of tax residence. A regularly updated list of Switzerland’s AEOI partner jurisdictions is available at https://www.sif.admin.ch.
On 18 December 2015, the Federal Assembly adopted the Convention on Mutual Administrative Assistance in Tax Matters (Mutual Assistance Convention) as well as the Multilateral Competent Authority Agreement on the Automatic Exchange of Financial Account Information (MCAA), together with the Federal Act on the International Automatic Exchange of Information in Tax Matters (AEOI Act). The Ordinance on the International Automatic Exchange of Information in Tax Matters (AEOI Ordinance), which contains the implementing provisions for the AEOI Act, was adopted by the Federal Council on 23 November 2016. This established the legal basis for AEOI, which came into force on 1 January 2017.
All persons who have their tax residence in a reportable AEOI partner jurisdiction will be reported under the AEOI. “Tax residence” refers to the place where a person is subject to unlimited tax liability according to the applicable jurisdiction-specific regulations. If a person is tax resident in more than one jurisdiction, the determination of tax residence for AEOI purposes cannot be based on the provisions of any double taxation agreement (DTA). The tax residence generally corresponds to the jurisdiction in which a person has their main place of residence. Ownership of a holiday home in another jurisdiction only gives rise to limited tax liability and, as such, is usually not relevant, unless unlimited tax liability is established due to the length of stay in that jurisdiction. In the case of an entity, the tax residence is generally in the jurisdiction of the entity’s place of incorporation or its place of effective management.
Domestic clients (i.e. persons who have their tax residence solely in Switzerland) are generally not affected by AEOI. However, domestic clients must also be reported under AEOI if there are any indicia (e.g. a foreign telephone number) indicating a tax residence abroad, and these indicia are not cured.
A self-certification would generally enable the identified indicia to be cured, thus preventing reporting to a potentially incorrect jurisdiction. If clients are unable or unwilling to provide the evidence required to cure the indicia, SGKB cannot prevent the submission of a report, as this is legally mandated under AEOI.
In the case of non-operating entities such as domiciliary companies and foundations (passive non-financial entities, NFEs), their controlling persons (in particular shareholders and beneficial owners) must also be identified and reported if they are tax resident in a reportable AEOI partner jurisdiction.
Under AEOI, the following information on reportable persons (natural person clients, entities and, in the case of passive NFEs, their controlling persons) is submitted annually by SGKB via the SFTA to the client's jurisdiction of tax residence:
- Name, address, tax residence, tax identification number (TIN) and date of birth of the reportable person
- Role of the controlling persons, if applicable (e.g. owner or beneficiary)
- Account number
- Name and identification number of SGKB
- Total balance as per the reference date
- Total gross amount of interest, dividends and other income, as well as total gross proceeds from the sale or redemption of
assets
Persons subject to reporting requirements are entitled to the rights set out in the Swiss Data Protection Act and the AEOI Act in relation to this information collected by SGKB and sent to the SFTA. As a result, clients may request information about this data and exercise their right to have incorrect data corrected.
The transferred data may only be used for the agreed purposes of AEOI, i.e. to ensure the correct taxation. However, the AEOI standard does not specify how the national tax authorities must carry this out in practice (e.g. spot checks or comprehensive data reviews). This means that AEOI brings little change for clients who properly declare their assets and income held at SGKB. In the case of clients who possibly may not have fully complied with their tax obligations to date, SGKB recommends consulting a tax advisor at their earliest convenience.
For further questions regarding AEOI, please contact your client advisor.
Contact
St.Galler Kantonalbank Ltd.
St. Leonhardstrasse 25
9001 St. Gallen
T +41 (0)71 231 31 31
E-Mail
BIC/Swift: KBSGCH22
Postal account: 90-219-8
Clearing-No.: 781