SIX Financial Information is meeting the data demands of withholding tax treaties between Switzerland and the UK, Germany and Austria with the integration of tax qualifications for securities and corporate actions in its Valordata data feed and Telekurs iD data look-up terminal.
The company has been working with paying agents, essentially banks, in Switzerland over the past year ahead of Swiss authority plans to bring the treaties into force on January 1, 2013. The treaties are aimed at ensuring tax compliance in the UK, Germany and Austria while preserving Swiss banking secrecy.
Those affected by the treaties can regularise past tax with a one-off payment in early 2013, but in future the levy of tax will be ongoing. In this case, individuals can disclose information to allow the automated exchange of data for tax purposes between the Swiss paying agents and foreign tax agencies, or they can opt for anonymity such that their details will not be revealed but withholding tax will be automated for the three signatory countries.
The legal framework of the treaties includes operational guidelines on the future levy of tax that require paying agents to know the tax qualifications for any transaction, whether it results in income or redemption, in each treaty country. SIX Financial Information is addressing the banking need for additional tax data on a central basis as it already delivers corporate actions data and will add tax information to this.
For example, in an exchange of securities the SIX Financial Information data will inform the Swiss paying agent on how the exchange should be treated from a tax point of view under each of the treaties and provide the necessary data to automate the calculation. Any payable tax is then forwarded to the Swiss tax authority for onward payment to tax authorities in the treaty countries.
According to Thomas Gross, CEO of SIX Financial Information, “The solutions developed by SIX facilitate an efficient and transparent implementation of the rules arising from the interpretation of the agreements, without individual paying agents having to implement the rules separately. This will considerably reduce the cost of implementing the new tax regime for the Swiss financial services industry as a whole.”
Not surprisingly, SIX Financial Information’s head of business development, Dominique Tanner, describes the final withholding tax agreements as a ‘hugely complex matter’. But he notes that both the Swiss banks and SIX Financial Information are on schedule to meet the January 2013 deadline.
“With millions of corporate actions every year, the final tax withholding system must be automated, particularly because the treaties are modelled in a way that requires immediate calculation and payment of tax when a corporate action is processed,” he says. “Banks need internal data such as customer data and our external data on how corporate actions qualify for tax under the treaties to comply with the agreements. Some are using the external data in their core banking system, while others have opted for a separate tax engine.”
SIX Financial Information says it is the only data provider – with the exception of Germany’s WM Datenservice covering its local market – to be offering a solution covering all three treaty countries, and it is taking a step-by-step approach to fulfilling the data requirements of the final withholding tax.
In July it released an initial data package covering tax qualifications for dividend and interest payments. In August it followed with a package covering less frequent corporate actions, and this month it will release a third package covering actions including splits and redemptions.
Additional packages will be made available on a monthly basis so that full coverage of required data is available by the end of the year and ahead of the compliance deadline.
SIX Financial Information has also designed the solution to support paying agencies that must meet ongoing Swiss strategy of making two or three agreements with additional countries every year. Meantime, the company may have more time to finesse its solution – while the treaty agreements are due to come into force on January 1 and have been ratified by the Swiss parliament, a situation that could change dependent on a public vote, none of the treaty countries has yet ratified the agreements.