The UK Government will have to rework a tax deal struck with Switzerland because it falls foul of EU law.
Under the deal, signed in August, from 2013, a withholding tax of 48 per cent on investment income, 40 per cent on dividends and 27 per cent on gains will be introduced for UK residents with funds in Swiss bank accounts. Funds currently held by UK taxpayers in Switzerland will be subject to a one-off deduction of between 19 per cent and 34 per cent to settle past tax liabilities.
Speaking to Money Marketing, EU taxation and customs spokeswoman Emer Traynor says the UK’s agreement is out of line with EU agreements with Switzerland and, due to the primacy of EU law, the UK’s contract will have to be reworked.
She says: “The UK’s agreements contain elements which differ from EU provisions in the EU-Swiss savings agreement. We are working with them to see how the agreements could be brought in line with the EU legislation.”
One area of conflict between the UK and the EU’s agreement is the withholding tax. The EU’s agreement imposes a 35 per cent withholding tax, paid to member states, compared with the UK agreement’s higher rates.
To encourage disclosure, the EU agreement also allows people to reclaim from the relevant member state the difference between that 35 per cent and the tax which should be paid. Traynor says the UK’s agreement is a softer approach. She says: “It is implicitly considered as final and a slightly softer stance on tax evasion. It says the Swiss will tax you, we will take the money, no questions asked, and your due is paid. We say if there is no transparency, you will have to pay the 35 per cent tax and we can still come after you.”
An HM Treasury spokeswoman says: “We are working closely with the European Commission to address the concerns.”