Bloomberg News - Swiss Banks May Lose $522 Million U.K. Tax Accord Payment

By Dylan Griffiths 

Valentin Flauraud/Bloomberg

A Swiss national flag flies from a flagpole above Lake Geneva in Geneva.

Credit Suisse Group AG (CSGN) and other Swiss banks may lose most of the 500 million-franc ($522 million) guarantee payment they made to the U.K. government as part of a tax deal, theSwiss Bankers Association said.

That payment, under an accord signed by Switzerland and the U.K. in October 2011, covered the failure by bank clients to disclose undeclared money in the past. With fewer untaxed U.K. assets in Switzerland than previously expected, the banks may not be reimbursed by their British customers, the Basel-based association said in an e-mailed statement today.

“The possibility can therefore not be ruled out that either none or only a small part of the bank’s guarantee payment of 500 million francs will be recovered,” the association said.

Switzerland and the U.K. signed the agreement to settle a dispute over tax evasion by wealthy Britons holding offshore accounts with Swiss private banks. With many British clients opting for voluntary disclosure and others holding resident non-domiciled status, which means they don’t fall under the withholding tax deal, the repayments by bank customers will be smaller than expected, the association said.

That may cost Credit Suisse as much as 90 million francs, which will be booked in the second quarter, the Zurich-based bank said in a statement

Under the accord, Swiss banks will levy a withholding tax of 27 percent on capital gains earned by Britons with offshore accounts. Revenue generated will go to the British Treasury, while client identities remain secret.