The US Treasury Department announced on Thursday that the United States and Switzerland have signed a bilateral agreement to implement provisions of the US Foreign Account Tax Compliance Act (FATCA).
FATCA was enacted by the US Congress in 2010 to require foreign financial institutions (FFIs) to report to the Internal Revenue Service (IRS), the US tax agency, information about financial accounts held by US taxpayers or by foreign entities in which US taxpayers hold a substantial interest.
The US-Switzerland agreement requires Switzerland to direct all reporting Swiss financial institutions to register with the IRS by January 1st 2014 and comply with FATCA due-diligence, reporting, and withholding requirements. Switzerland also agrees to instruct reporting Swiss financial institutions to request certain information from pre-existing account holders and report it to the IRS and to obtain consent from new account holders to report this information as a condition of opening the account.
The United States is obligated to treat reporting Swiss financial institutions that register with the IRS and comply with the terms of an FFI agreement as complying with FATCA and not subject to withholding under FATCA.
The United States, France, Germany, Italy, Spain, and the United Kingdom all participated in developing model agreements under FATCA and have agreed to work, in cooperation with other partner countries, the Organisation for Economic Co-operation and Development and the European Commission, toward establishing reporting and due-diligence standards to fight tax evasion with less burdensome compliance requirements.
The US Treasury Department reports that so far eight countries have signed or initialled FATCA agreements with the United States.
—Alistair M. Nevius (email@example.com) is CGMA Magazine’s editor-in-chief, tax.