The Swiss Federal Tax Administration issued a release today indicating that the agreement on the taxation of savings income between Switzerland and the EU will enter into force on schedule, on 1 July.

According to the FTA, *”The core of the agreement is Switzerland’s willingness to introduce a system of tax retention on interest payments to persons liable to tax in the EU. An alternative to the system of tax retention is the possibility of voluntary declaration of interest payments to the country of residence of the interest payment recipient.

“On the one hand Switzerland is thus ensuring that the directive on the taxation of savings income cannot be circumvented via Switzerland. On the other, fiscal banking secrecy concerning income tax which is anchored in the Swiss legal system is upheld.”*

The referenced system of tax retention refers to interest payments which a paying agent on Swiss territory makes to an individual resident for tax purposes in an EU member state. The agreement also allows foreign bank clients to choose between a system of tax retention and a voluntary declaration to the tax authorities.

The ultimate aim of the EU Directive (Council Directive 2003/48/EC) is to enable savings income in the form of interest payments made in one Member State to beneficial owners who are individuals resident for tax purposes in another Member State to be made subject to effective taxation in accordance with the laws of the latter Member State.