The Indian and Swiss governments will introduce automatic exchange of information (AEOI) in tax matters and start exchanging data with each other under the OECD's common reporting standard (CRS) starting in 2019.
In a joint declaration signed on November 22 by Sushil Chandra, chair of India's Central Board of Direct Taxes, and Gilles Roduit, deputy chief of mission of the Swiss Embassy in India, both governments committed to start collecting information in 2018 under the CRS.
The exchanges will be based on the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information , which is based on the OECD's Multilateral Convention on Mutual Administrative Assistance in Tax Matters (2010 protocol ) and activates the CRS. The OECD introduced the standard in February 2014, and G-20 leaders approved it at their November 2015 summit in Brisbane, Australia.
According to the joint declaration, both India and Switzerland agree that confidentiality rules and data safeguards must be applied in line with international standards, and that both governments must notify each other of relevant developments regarding the implementation of the CRS in their domestic legislation.
Both countries have also notified each other about facilities they offer to individuals who want to voluntarily disclose any hidden assets, to make a smooth transition to an AEOI system, the declaration says.
Switzerland's agreement with India comes shortly after it had announced similar joint declarations with Argentina, Brazil, Mexico, and Uruguay.
"Switzerland is thus strengthening its network of AEOI partner states," the Swiss Federal Department of Finance (FDF) said in a news release.
"India meets in particular the high demands in terms of adherence to the principle of speciality and the safeguarding of confidentiality for the data delivered, which are prerequisites for the introduction of the AEOI," the FDF added.
The FDF will soon launch a consultation on the introduction of AEOI with India and other countries, and will send corresponding federal decrees to the Swiss Parliament for approval, according to the release.
The Swiss-India declaration comes after years of talks between the two countries on the issue of exchanging information on bank accounts held by Indians in Swiss bank HSBC. Names of Indian account holders were culled from HSBC account data that ex-HSBC employee Hervé Falciani leaked in 2009. Falciani, who worked at the bank's Geneva branch, gave French authorities bank account data that had been stolen between 2006 and 2007. Then-French Finance Minister Christine Lagarde later distributed the list to her counterparts in other countries.
In February 2014, Indian tax officials seeking to crack down on the country's massive problem with undeclared funds, also known as "black money," started investigating hundreds of individuals and corporate entities that were alleged to have illegal offshore accounts. After receiving the HSBC data, the Indian government had pressured its Swiss counterparts to furnish more information on the accounts, but the Swiss had refused to cooperate in the matter because stolen data was involved.
"Recently, [Switzerland] agreed to share information with Indian authorities in cases where investigations have been carried out independently by the Indian authorities," said Amit Maheshwari of Ashok Maheshwary & Associates, although he noted the new AEOI standard does not affect the Falciani list.