On February 14, 2013 the USA and Switzerland signed a FATCA agreement. We earlier discussed what is FATCA. This IGA is a significant step and has a profound impact on Swiss financial institutions and Americans expats in Switzerland. This FATCA agreement is based on the reciprocal Model II business-to-government approach to implementing the Foreign Account Compliance Act.
This FATCA agreement is unique in its nature due to Switzerland’s strict bank secrecy laws and requirements imposed on Swiss FFIs (foreign financial institutions) to provide the information about US account holders to the IRS under the Foreign Account Compliance Act (FATCA).
“Today marks a huge step for Switzerland in becoming a compliant jurisdiction for U.S. persons, where bank secrecy remains when it comes to privacy but where privacy can no longer be a pretext for tax evasion,” said Boitelle, a partner at the Geneva office of Bonnard Lawson. “I think this is a great step forward in Swiss-U.S. bilateral relations, and I am happy that we have achieved this result in a relatively short time frame. With this FATCA agreement entering into force — hopefully soon — the U.S. and Switzerland can devote their time and energy to other bilateral tax issues, in a much more positive context.”
How will this FATCA affect American expats residing in Switzerland?
Boitelle mentioned that he hopes that as a result of this FATCA, Swiss banks will again be open for U.S. citizens and businesses. “We have met great difficulties recently in opening bank accounts for U.S. corporate and private clients,” he said. “And U.S. expatriates working for many U.S. multinational companies present in Switzerland have had their accounts closed and have been refused basic retail banking services, mortgages, loans, etc. It’s really an outrageous situation, resulting in real and concrete damages and impeding the development of U.S. businesses in Switzerland.”
How will this FATCA affect Swiss banks that are currently under investigation by the Department of Justice?
These Swiss banks will probably have to reach individual settlements with the IRS. Although, the Swiss government hopes that this Foreign Account Compliance Act (FATCA) will ease the process for these banks.
Are the accounts of dual Swiss-American citizens exposed in other countries as a result of this FATCA?
Switzerland will not enter in automatic data exchange with multiple countries per this FATCA (Foreign Account Compliance Act). As of today, Switzerland signed tax withholding agreements only with the USA, the U.K, Austria and Germany (under review by the German parliament).
American expats in Switzerland who have questions about new FATCA requirements as well as other overseas tax questions, must contact a US expatriate tax preparer that provides international tax services. International tax experts at Artio Partners will assist you with FATCA and US expatriate tax return issues.