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Switzerland prepares to comply with OECD transparency demands

Monday, 22 January, 2018

The Swiss government has begun consulting on a bill to implement the OECD global tax transparency forum's recommendations on reform of Switzerland's bank secrecy law.

The OECD forum published the findings of its Phase 2 peer review report in July 2016. Though it assessed the jurisdiction as 'largely compliant', it recommended greater transparency around legal entities and the exchange of financial account information.

Switzerland has already agreed to implement the OECD's Common Reporting Standard (CRS) for information exchange, but now needs to go further. Among the recommendations included in the Swiss draft bill is one proposing the compulsory conversion of bearer shares into registered shares. There are already restrictions in Switzerland on the use of bearer shares, but the OECD peer review considered them inadequate. Failure to implement the report's recommendation would leave it unable to get an overall rating of 'full compliance' at the next review this summer. That would risk the country remaining on the European Commission's 'grey list' of jurisdictions that have not fully demonstrated tax transparency.

Companies will also be required to keep a register of shareholders and beneficial owners, and they and their shareholders will face penalties for failing to report beneficial owners. The registers will be open to inspection by the law enforcement agencies and by financial intermediaries for due diligence purposes.

The bill will also contain measures on the confidentiality of administrative assistance requests and the handling of stolen data – a long-running and highly contentious issue for the Swiss.

The consultation is open until 24 April, and the bill will go to Parliament in late 2018. In the meantime, the OECD forum is preparing to perform a further peer review of Switzerland in the second half of this year.

The Swiss Federal Council has decided not to table legislation enabling the unilateral use of the OECD CRS for exchange of information. It says standards-compliant agreements have instead been made with several other countries, and, since 1 January 2018, Switzerland has complied with the Administrative Assistance Convention, allowing it to exchange information with other signatory countries.

Sources