Germany rejects tax treaty with Switzerland concerning tax evasion

Germany rejects tax treaty with Switzerland concerning tax evasion

The German Upper House of Parliament has rejected a tax treaty designed to legalize undeclared assets held by German nationals in Swiss banks. The German Social Democrats and the Greens united to reject the accord on the grounds that the accord has significant loopholes and is contrary to notions of equity.

In an effort to salvage the accord the Bundestag (lower house) and federal government now have recourse to an arbitration committee. However, substantive improvements to the treaty itself are not possible within the framework of the arbitration process as the committee is not able to propose changes to the actual text.

The Accord was intended to come into force on January 1st 2014. The Accord, if approved, would levy a retroactive penalty/tax of up to 41% on capital in offshore accounts held by foreign citizens and future interest income would be taxed at the same rate as in Germany. However, the accord would allow the account holders to remain anonymous.


Despite the vote, the Swiss government reiterated that it is committed to cooperating with Germany to ratify the accord.

While Germany has failed to ratify the accord with Switzerland, Switzerland has ratified similar agreements with the UK and Austria. Negotiations are currently underway with Greece and Italy to ratify similar agreements. France has so far rejected the idea of a bilateral accord with the Swiss concerning tax evasion, preferring an automatic data exchange.

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