Switzerland has signed a joint declaration on the introduction of the automatic exchange of information in tax matters on a reciprocal basis with Canada.

The two countries intend to start collecting data in accordance with the Organisation for Economic Co-operation and Development's global standard in 2017 and begin to transmit data in 2018, after the necessary laws have been passed in both countries.

Switzerland has already signed such declarations with the European Union, Australia, the British crown dependencies of Jersey, Guernsey and the Isle of Man, as well as Iceland, Norway and Japan.

From a legal viewpoint, the automatic exchange of information with Canada will be based on the Multilateral Competent Authority Agreement on the Automatic Exchange of Financial Account Information. The MCAA is based on the international standard for the exchange of information developed by the OECD. To date, almost 100 states have undertaken to adopt the standard and to start exchanging information on this basis for the first time in 2017 or 2018.

The Federal Council has authorised the Federal Department of Finance (FDF) to initiate a consultation on the introduction of AEOI now that it has stuck its deal with Canada. Thereafter, the corresponding federal decrees will be submitted to Parliament for approval.

Some commentators believe that the days of Canadians who hold accounts at Swiss private banks being able to 'come clean' to the Canada Revenue Agency about their unpaid tax on a preferential basis are numbered because of this deal. The biggest of the private banks have reportedly asked all Canadian HNW individuals on their books whether they have anything to disclose. At the end of last year, many were threatening to close the accounts of those who did not reply.

Recalcitrant taxpayers who are unmasked without making voluntary disclosures face not only the expense of paying the tax on the monies they hid from their tax authority but also of paying gross negligence penalties that could amount to half as much again. Other penalties and interest charges apply and there is always the threat of prosecution for tax evasion. If this is successful, there could be a prison sentence and a penalty of double the amount of tax owed on top of everything else.