Federal Council adopts FATCA dispatch
Bern, 10.04.2013 - At its meeting today, the Federal Council adopted the FATCA dispatch for the attention of parliament. The agreement will help Swiss financial institutions by means of simplifications in the implementation of the US tax legislation.
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.
With the enactment of FATCA, the United States 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 (Internal Revenue Service, IRS) and report on identified US accounts or else to deduct and transfer a withholding tax.
The FATCA agreement enables Swiss financial institutions to exchange information with the IRS and provides for simplifications in implementing FATCA. The Final Regulations published by the US Treasury and the IRS on 17 January 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 ensures that the accounts held by US persons with Swiss financial institutions are disclosed to the US tax authorities either with the consent of the account holder or through normal administrative assistance channels. Consequently, 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.
As the United States will phase in FATCA from 1 January 2014, Swiss financial institutions will be forced to implement FATCA 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. The agreed simplifications will not apply if there is no agreement.
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