Switzerland and the United States have ratified their double taxation agreement a decade after it was signed by both countries.
Effective from 20 September 2019, the US will be able to request financial account information from Switzerland dating back to cases from 23 September 2009 onwards.
But group requests for information from the American tax authorities under the Foreign Account Tax Compliance Act (Fatca) will only apply to cases dated after 30 June 2014.
Bumps on the road
The double taxation protocol was signed on 23 September 2009, but stalled in the US congress because one of its members believed it to be a violation of American citizens’ privacy rights.
The senate only approved it on 17 July 2019.
The Swiss government, on the other hand, passed the protocol in June 2010.
Covering all bases
“The core element of this revision is the exchange of information,” said the Swiss Federal Council.
“There is no longer any distinction between tax evasion and tax fraud, neither for individual nor for group requests.
“This is in line with the international standard on the exchange of information upon request, which Switzerland applies to more than 100 states and territories, but not to date to the US.”
Provisions have also been taken in case the two countries cannot settle a dispute.
The Federal Council added: “A mandatory arbitration clause ensures that double taxation is avoided even in cases where the competent authorities cannot reach agreement in the mutual agreement procedure.”
Disclosing assets
“Americans with bank accounts in Switzerland, which adhered to the reporting rules all along, naturally, have no reason to worry about the adjustments to the double tax treaty,” Anne Liebgott, chief executive and founder of wealth management firm Americans Welcome – Switzerland, told International Adviser.
“Over the past years, there have been several offshore voluntary disclosure programs offered by the Internal Revenue Service (IRS) to US taxpayers to come clean on their foreign-held assets, in Switzerland and elsewhere.
“Should there be some US citizens that haven’t yet declared their assets abroad, in this case in Switzerland, then there is a chance that they will be discovered due to the exchange of information.”
The US has also signed a similar agreement with Luxembourg at the beginning of September 2019.
