Switzerland and US Signed FATCA Agreement

Switzerland and the USA have signed a Foreign Account Tax Compliance Act (FATCA) agreement in Bern. It is expected that the agreement will help Swiss financial institutions in the implementation of the US tax legislation.

Initialed on December 03, 2012, the Swiss-US agreement provides for simplifications in implementing FATCA. The agreement has to be submitted to the Swiss parliament for approval and is subject to an optional referendum in Switzerland.

The FATCA agreement signed with Switzerland allows Swiss financial institutions to exchange information with the US tax authority. The Final Regulations published by the US Treasury and the tax authority on January 17, 2013, are applicable to Swiss financial institutions to the extent that the agreement and its annexes do not expressly make provision for derogations from the rules.

The agreement signed provides for simplifications for following sections of the Swiss financial industry:

• Social security funds, private pension funds and property and casualty insurers are excluded from the scope of FATCA.
• Collective investment vehicles and financial institutions with a predominantly local clientele are deemed FATCA-compliant under certain conditions and are subject only to a registration obligation and the associated obligations.
• The due diligence requirements for the identification of US clients, to which all other Swiss financial institutions are subject, are designed in such a way that the administrative burden is kept within reasonable limits.

The agreement ensures that accounts owned by US persons in Swiss financial institutions are disclosed to the US tax authority either with the consent of the account holder or by means of group requests within the scope of administrative assistance. Information will not be transferred automatically in the absence of consent, and instead will be exchanged only on the basis of the administrative assistance clause in the double taxation agreement.

Swiss financial institutions will be forced to implement FATCA from January 01, 2014, irrespective of the relevant agreement between Switzerland and the US.