Credit Suisse comments on today’s SBA announcement regarding Swiss banks’ UK legacy pre-payment
The Swiss Bankers Association (SBA) today gave an update on the implementation of the withholding tax treaty between Switzerland and the UK. According to the SBA, it cannot be excluded that the banks’ guarantee payment will not, or only to a very limited extent, be reimbursed, due to significantly lower than expected client regularization payments under the treaty. Credit Suisse expects a negative after-tax impact of no more than CHF 90 million, which will be recognized in its 2Q13 results.
As part of the withholding tax treaty between Switzerland and the UK that was signed in October 2011, and came into effect on January 1, 2013, Swiss banks were collectively obliged to fund a CHF 500 million pool as a guarantee for client regularization payments above a minimum level of CHF 800 million. However, as the SBA has announced, the amount of undeclared assets held by UK citizens and liable for the payment is substantially less than originally anticipated by the Swiss banking industry. This reflected a number of factors including self-declarations by UK account holders, either directly to the UK HM Revenue & Customs or via the tax disclosure regimes available in alternate locations. The asset pool was also reduced by a high proportion of resident non-domiciled clients with limited UK tax obligations.
In accordance with the allocation key of the guaranteed amount provided under Swiss law, Credit Suisse would bear 20 percent of the ultimate cost. Credit Suisse therefore expects a negative after-tax impact of no more than CHF 90 million, which will be recognized in its 2Q13 results. Any subsequent payments that will reduce that amount will positively affect future financial results.