Under the terms of the agreement, Swiss financial institutions will exchange information with the US tax authority, the Internal Revenue Service, but with exemptions applied to social security, private retirement funds and casualty and property insurances, as previously reported.
In a statement released yesterday, the Swiss government said: “Both the FATCA agreement between Switzerland and the United States that was signed on 14 February 2013 and its legal implementation were widely accepted during the consultation procedure.
“While the extraterritorial US tax legislation was generally criticised, it was nevertheless acknowledged that, with the agreement, Switzerland had achieved simplifications in the implementation of the legislation for Swiss financial institutions.”
The statement added that “with the enactment of FATCA, the US wishes to ensure that all income earned worldwide by US taxpayers on accounts held abroad can be taxed by the United States. FATCA essentially requires foreign financial institutions to register with the US tax authorities and report on identified US accounts or else to deduct and transfer a withholding tax”.
Importantly, part of the agreement stipulates that accounts held by US citizens will not be disclosed automatically but only with the consent of the account holder or “on the basis of the administrative assistance clause in the double taxation agreement” – i.e. only on request from the IRS.
The agreement will come into force from 1 January 2014 and Swiss financial institutions have been informed they must implement the FATCA agreement from this date “irrespective of an agreement between Switzerland and the United States, if they do not want to be excluded from the US capital market”.
