Swiss collect first tax savings income for EU

The withholding tax will step up to 35 per cent by 2011 swissinfo.ch

The first taxation of savings income on European Union residents' accounts held in Switzerland shows the system works, according to the finance ministry.

Under the terms of an accord between Switzerland and the EU which came into force last July, the Swiss impose a withholding tax and pay the bulk to the EU.

The ministry announced on Wednesday that the federal tax administration had received about SFr138 million ($107 million) for the 2005 collection period, which ran from July 1 to December 31.

In a statement, it said the amount received showed the Swiss system of tax retention worked, although it was too early to assess the development of revenues.

Alain Bichsel, a spokesman for the Swiss Bankers Association, added that the banks had done their homework, noting they had made considerable investments to make the system work smoothly.

No comment

Although there are no exact figures, it has been estimated that the banks spent up to SFr300 million on introducing the tax retention scheme.

About SFr103 million of the money collected will be transferred to the beneficiary EU states. Switzerland will receive SFr34 million as payment for its additional operating expenses.

Of this, the Swiss government is to retain about SFr31 million with the remaining SFr3 million going to the cantons.

The bankers association said it did not want to comment on the amount of money that had been collected in the first six months of the Swiss-EU accord.

Estimates of the result had varied considerably, with the banks warning against too high expectations.

Tax retention

At the heart of the accord is tax retention on interest payments to people in Switzerland liable to tax in the EU.

It is also used by EU members Austria, Luxembourg and Belgium as well as Liechtenstein and some other non-member states.

Initially the withholding tax rate has been set at 15 per cent, rising to 35 per cent from 2011.

swissinfo with agencies

Key facts

Tax collected: about SFr138 million.
75%, around SFr103, will go to beneficiary states in the EU.
The remaining SFr34 million will go to the government (SFr31 million) and the cantons (SFr3 million) for their expenses.

In brief

As part of the second set of bilateral accords between Switzerland and the EU, Bern agreed to introduce a withholding tax for the EU from July 1, 2005.

It applies to interest payments made to anyone liable for tax in the EU and is an alternative to an automatic exchange of information.

The main demands of Swiss banks were that both financial privacy (banking secrecy) and international competitiveness be preserved.

The Swiss banks said they were in general satisfied with the agreement, although introducing it would entail considerable costs.