Switzerland and Germany sign double taxation agreement and declaration on the initiation of negotiations on tax matters

(Last modification 13.12.2011)

Bern, 27.10.2010 - Today, Federal Councillor Hans-Rudolf Merz and the German Finance Minister Wolfgang Schäuble signed a joint declaration on the initiation of negotiations concerning tax issues between Switzerland and Germany. In addition, both ministers signed the revised DTA in accordance with the OECD standard during the meeting in Bern. By signing, Mr. Merz and Mr. Schäuble reaffirmed the willingness of both countries to further intensify cooperation in financial and tax matters and to strengthen long-term legal security.

By signing the joint declaration, Federal Councillor Merz and German Finance Minister Schäuble have agreed to initiate negotiations on the expansion of cross-border cooperation in tax matters and improved market access for banks. Negotiations will be based on the exploratory talks conducted by a joint working group in recent months.

Negotiations are due to commence at the start of 2011. The Federal Council intends to approve the negotiating mandate after consulting the relevant parliamentary committees and other interested parties by the end of the year. The outcome of the negotiations will then be submitted to parliament.

Switzerland and Germany are confident that the negotiations will lead to a fair and lasting solution in the interests of both states. Both sides want that a new solution would enable distortions to competition in terms of tax issues to be avoided. German taxpayers should not be deterred from holding a bank account in Switzerland. In future, however, the possible risk of tax evasion should not impact on the investment decisions of German taxpayers.

During the exploratory talks, Switzerland and Germany considered a solution which respects the protection of bank client privacy on the one hand but also guarantees the implementation of justified tax claims. Consequently, in the area of investment income one would have a system which, in terms of its impact, is comparable to the automatic exchange of information in the long-term.

The solution, the details of which are to be clarified during the negotiations, covers the following points in particular:

  • Regularisation of the past: Untaxed existing assets should be regularised.
  • Final withholding tax for the future: Future investment income should be covered by a withholding tax, the rate of which has yet to be negotiated. The final withholding tax is a tax at source. In principle, after it has been paid the tax obligation towards the country of domicile will have been fulfilled. Extended administrative assistance has been agreed in order to prevent any possibility of circumventing the withholding tax. This envisages that the German authorities can submit a request for administrative assistance which states the name of the client, but not necessarily the name of the bank. The number of requests that can be submitted is limited and must be well founded. So-called fishing expeditions are not permissible.
  • Further elements: Switzerland and Germany intend to resolve the issue of mutual market access for financial institutions. In addition, the problem of purchasing tax collection data is to be resolved. The package includes resolving the problem of possible criminal prosecution of bank employees.

With the proposed approach, Switzerland will implement its financial centre strategy coherently and credibly, under which the Swiss financial centre focuses on the management of taxed assets.

Double taxation agreement

Today, Federal Councillor Merz and German Finance Minister Schäuble also signed a revised double taxation agreement (DTA). This contains a provision on the exchange of information in accordance with Art. 26 of the OECD Model Convention. The agreement was initialled in March 2010 and is in line with the key points defined by the Federal Council in 2009. In addition, the new DTA contains several favourable provisions for the Swiss and German economies, including a reduction in the relevant stake for a zero rate of withholding tax on dividends and the introduction of an arbitration clause.

Address for enquiries

Mario Tuor, Head of Communications, State Secretariat for International Financial Matters, +41 31 322 46 16


Federal Department of Finance