On June 27, 2024 the Swiss Confederation and the United States of America signed an Agreement to improve international tax compliance and to implement FATCA. Currently Switzerland provides financial account data to the United States on a unilateral basis. In the future, Switzerland will also receive corresponding information from the United States within the framework of an automatic exchange of information. According to the Swiss Federal Department of Finance the change of model is expected to apply from 2027.
The Foreign Account Tax Compliance Act (FATCA) is a set of US regulations that has applied worldwide for all countries since January 1, 2014. It requires foreign financial institutions to disclose information on US accounts to the Internal Revenue Service or levy a tax.
The FATCA implementation in Switzerland is currently based on Model 2, which means that Swiss financial institutions disclose account details directly to the US tax authority with the consent of the US clients concerned. Where US clients do not give their consent, the United States has to request this data through normal administrative assistance channels. By contrast, no account data is transmitted from the United States to Switzerland.
In October 2014 the Swiss Federal Council decided to introduce the automatic exchange of information. Consequently, it instructed the Federal Department of Finance (FDF) to enter into negotiations with the United States to switch from Model 2 to Model 1. In the case of Model 1, the tax authorities of both countries automatically an mutually exchange information on account data. This means that Switzerland will also receive account data from the United States in the future. Swiss financial institutions will no longer provide the required data to the US authorities, but rather to the Swiss Federal Tax Administration (FTA), which will then transmit the data to the IRS.
Implementation of the (new) FATCA agreement requires national law to be amended. In Switzerland, the Federal Assembly will decide on this. According to the current schedule, Switzerland's change of model should come into force on January 1, 2027.
The full English text of the Agreement between Switzerland and the United States of America to improve international tax compliance and to implement FATCA, 2 Annexes and the text of a Memorandum of Understanding regarding the Agreement between Switzerland and the United States of America to improve international tax compliance and to implement FATCA can be found here.
Copyright – internationaltaxplaza.info
Follow International Tax Plaza on Twitter (@IntTaxPlaza)
