Switzerland knows how to escape the automatic exchange
Automatic exchange of tax information between countries is a real nightmare for high net worth individuals. For those who used to hide their profits, automatic exchange brings new rules to the game with tax authorities.
In order to avoid losing a reputation of a “tax favorable country”, Swiss authorities came up with idea of making an automatic exchange less painful. According to the new approach each person can file an objection against an automatic exchange to Swiss tax authorities.
Such an objection is only possible if there is a sufficient risk to believe that a country of tax residence of a person, in respect to whom such an automatic exchange is performed, has significant violations of the rule of law. For instance, if there are significant grounds to assume that human rights of a person can be violated in the country of their residence in the course of criminal prosecution or at the stage of judgement’s enforcement, an automatic exchange can be reasonably put on hold.
If upon examination of such an objection a Swiss tax authorities find out indicated violations, then a person will be granted with individual legal protection or “protection juridique individuelle”* (hereunder “PJI”). If granted, PJI will exempt personal files of an individual from further exchange with the country of a tax residence of such an individual.
An objection should be submitted until 31st July of the year, in which an automatic exchange is planned.
* Federal Law as of 18th December 2015 “On Automatic International Exchange of Information related to Fiscal Matters”