Automatic exchange and the new normal

From 2017 to the first exchange in 2018

A multilateral standard finally ended the conflict over undeclared German money. On 27 May 2015 Switzerland and the European Union signed an agreement on the automatic exchange of financial account information, which replaced the savings tax agreement of 2004. It was approved by the Federal Assembly on 17 June 2016 and entered into force on 1 January 2017. Swiss financial institutions began to collect data on accounts held by persons resident in the member states of the Union in 2017, with the first exchange following in 2018.¹ Since the autumn of 2018, the Swiss Federal Tax Administration has therefore transmitted every year to the German Federal Central Tax Office (Bundeszentralamt für Steuern) the name, address, tax identification number, account balance and income of every German resident who holds an account with a Swiss bank, as well as of German residents who are controlling persons of Swiss or foreign entities with Swiss accounts. The German authorities pass the data on to the competent local tax offices, which compare them with the tax returns of the persons concerned. Chapter G.III describes the legal instruments of the system and Chapter I.V its place within Swiss administrative assistance.

For German clients of Zurich banks, the automatic exchange ended the possibility of holding undeclared money in Switzerland. It also ended the practical significance of the tax CDs, since a data carrier with client names is worthless to an authority that already receives the same information officially every year. The last wave of disclosures on both sides of the border, in 2017 and 2018, reflected this transition. In Switzerland alone, about 40,000 voluntary disclosures were filed in 2018 before the automatic exchange with the neighbouring states began in the autumn of that year.² Clients who had not regularised their accounts by then faced the prospect that the tax office would find the account on its own and that a voluntary disclosure would no longer be possible, since the offence would be regarded as discovered.

The Zurich banks had anticipated the change. Following the “clean money strategy” (Weissgeldstrategie) announced by the Federal Council and the banking industry after 2009, which Chapter G.III describes, they required their German clients to demonstrate tax compliance, terminated relationships with clients who refused, and in many cases helped the clients with the disclosure process. The departure of undeclared German money, which had begun with the tax CDs, was essentially complete by 2018. What remained in Zurich was declared money, held there for the reasons that had always attracted declared money: the stability of the franc, the quality of asset management, legal certainty and the diversification of political risk.

The double taxation agreement after 2010

The treaty basis of the relationship changed in the same period. The protocol of 27 October 2010 to the double taxation agreement, which entered into force on 21 December 2011, introduced the exchange of information on request according to the OECD standard, which Switzerland had accepted on 13 March 2009.³ A further protocol was signed on 21 August 2023. It adapts the agreement to the minimum standards of the OECD’s project on base erosion and profit shifting, including a principal purpose test against treaty abuse, improves the dispute resolution procedure, applies the OECD principles for attributing profits to permanent establishments and clarifies the rules for cross-border independent activities. The protocol entered into force on 27 November 2025 and applies in principle from 1 January 2026.⁴ The content of the agreement, including its rules for German emigrants, is treated in Chapter K.II. For the history of the relationship, it is enough to note that the treaty which for four decades had excluded the exchange of information on undeclared income now contains the full international standard, supplemented by automatic exchange under the agreement with the European Union.

Market access: the cross-border business after the conflict

The end of undeclared money did not end the legal questions surrounding German business in Zurich. It shifted them from tax law to financial market law. A Swiss bank that actively serves clients in Germany from Switzerland provides banking or financial services in Germany within the meaning of § 32 of the German Banking Act (Kreditwesengesetz, KWG) and needs either a licence or an exemption. Under § 2(5) KWG, the Federal Financial Supervisory Authority (BaFin) may exempt a foreign firm from the licensing requirement and from ongoing supervision if the nature of its business does not require German supervision. For Swiss banks, a simplified exemption procedure was agreed between the two states in 2014. It allowed Swiss banks to acquire new German clients directly from Switzerland without the involvement of a licensed German credit institution. Its application was interrupted in 2021 over questions concerning Article 271 of the Swiss Criminal Code, which were clarified between the authorities in December 2021, after which BaFin resumed processing applications.⁵

This framework is now changing again. Article 21c of the European Union’s revised Capital Requirements Directive (CRD VI) requires third-country undertakings that provide core banking services, such as deposit-taking and lending, to clients in a member state to establish a branch there, subject to exceptions for reverse solicitation and for investment services under MiFID II. The rule applies from 11 January 2027. Germany transposed the directive through the Bank Directive Implementation and Bureaucracy Relief Act (Bankenrichtlinienumsetzungs- und Bürokratieentlastungsgesetz, BRUBEG), published in the Federal Law Gazette on 30 March 2026, with the core provisions in new §§ 53c et seq. KWG in force since 1 April 2026.⁶ For Zurich banks with German clients, the consequence is a choice between a German branch, an EU subsidiary, restriction to MiFID services and client-initiated business, or withdrawal from active business in Germany. The history described in this chapter has thus come full circle. Two centuries after German capital helped to build the Zurich financial centre, the question of how Zurich may serve German clients is once again a question of German and European law.

Notes

1. Federal Department of Foreign Affairs, Europe Division, “Automatischer Informationsaustausch in Steuersachen” (cited above). ↩
2. Neue Zürcher Zeitung, “Zehntausende Steuerhinterzieher zeigen sich selber an” (cited above), which reports that the surge preceded the start of the exchange with the neighbouring countries on 1 October 2018 and that nearly ten billion francs of previously untaxed assets were declared that year. ↩
3. ESTV, “Deutschland” (cited above), with the dates of conclusion and entry into force of the protocol of 27 October 2010. ↩
4. State Secretariat for International Finance (SIF), “Inkrafttreten des Änderungsprotokolls zum Doppelbesteuerungsabkommen mit Deutschland”, press release, 28 November 2025, https://www.sif.admin.ch/de/inkrafttreten-des-aenderungsprotokolls-zum-doppelbesteuerungsabkommen-mit-deutschland. The German approving law was published in Bundesgesetzblatt 2025 II no. 275. ↩
5. Deloitte Switzerland, “Vereinfachtes Freistellungsverfahren für Schweizer Banken nach dem deutschen Kreditwesengesetz”, https://www.deloitte.com/ch/de/Industries/financial-services/perspectives/simplified-exemption-procedure-swiss-banks.html, which describes the procedure, its basis in an understanding of 2014 and the interruption and resumption in 2021. ↩
6. altii, “Ende der Freistellung: Was Artikel 21c CRD VI für Family Offices und Wealth Manager bedeutet”, https://www.altii.de/ende-der-freistellung-was-artikel-21c-crd-vi-fur-family-offices-und-wealth-manager-bedeutet/, on the date of application, the exceptions, the grandfathering of existing contracts and the German implementation in BGBl. 2026 I no. 81. ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of September 2025.