Tax regulations

Automatic Exchange of Information (AEOI)

What is AEOI?
The global fight to combat tax evasion has become a major concern of the world economy in the context of the financial and debt crisis. Given this situation, the OECD decided to establish a Common Reporting Standard (CRS). This standard constitutes the basis of an automatic exchange of information (AEOI) between individual countries for reportable accounts.

As part of the AEOI and for the purpose of compliance with the corresponding legislation governing the international automatic exchange of information in fiscal matters, as a Swiss bank, Aquila Ltd. (hereinafter “Aquila“) is obliged to identify reportable accounts and to report these accounts to the Swiss Federal Tax Authorities (ESTV). An account is deemed to be reportable as soon as its holder, the financially authorized individual, or the controlling person is a reportable person. Reportable persons in this case are natural persons or legal entities with residency in AEOI partner countries of Switzerland.

Switzerland has introduced the AEOI in 2017 for the first countries, and exchanged information with these countries in 2018 for the first time (initially for the fiscal period 2017). The respective rollout dates of the AEOI with the specific partners can be found in the list of current partner states specified below.

Which information is exchanged?
Reportable information includes both personal data and information on the reportable account. Personal information encompasses name, address, country of residency for tax purposes, tax identification number and the date of birth of the account holder, the financially authorized individual or the controlling person. With respect to the reportable account, the account number, total gross return on dividends, interest and other earnings, total gross proceeds from the sale or buy-back of assets, and the total balance or value of the account at the end of the respective calendar year are all passed on (first time at the end of 2017).

The ESTV exchanges the received information with the tax authority of the country in which the reportable person has residency for tax purposes. An exchange will only be possible with partner countries, i.e. those countries with which Switzerland has concluded a corresponding bilateral agreement. The current list of partner countries (including reporting date) can be viewed at any time at https://www.sif.admin.ch.

For what purpose is the information used?
Information may only be passed on, and access granted, to the tax authorities of the partner states in which the reportable person is considered a resident for tax purposes, and this information may only be used for fiscal purposes. Forwarding of the received information by the country receiving it is strictly prohibited at all times. The receiving country must handle this information under strict confidentiality.

Qualified Intermediary (QI)

What is a QI?
The “Qualified Intermediary Agreement“ is an agreement between banks and the Internal Revenue Service (IRS) in which the respective banks are obliged to collect the withholding tax on earnings made on US securities in deposit/securities accounts held by non-US citizens.

Application of the double taxation agreement?
With respect to US securities, as in other fiscal areas, it is possible to profit from double taxation agreements (DTA) under certain conditions. If your country of residence for tax purposes is a country that has concluded a corresponding double taxation agreement with the USA and you are not a US citizen, then you may make take advantage of this situation provided that the respective requirements of the DTA have been fulfilled. This means that only the reduced taxation percentage rate, according to the applicable DTA (usually 15% instead of 30%) will be applied to proceeds on US securities.

The current list of countries which have a corresponding DTA with the USA, as well as the corresponding taxation rates, can be viewed via the following link: www.swissbanking.org.

What does Aquila do?
For clients who qualify as a non-US citizen and who invest in US securities, Aquila shall perform the corresponding deductions independently, based on the known country of residency for tax purposes of the client, and in accordance with the applicable double taxation agreement, provided that no other instruction has been issued by the client.

Our team will be happy to answer your questions.