The US and Switzerland have ended several years of confrontation over the existence of offshore Swiss accounts for US citizens with a sweeping agreement, announced today.

After months of wrangling, the US and Swiss governments have signed a joint statement in Washington DC designed to draw a line under a prolonged tax dispute between Swiss banks and US authorities. The deal includes fines on certain categories of bank.

The agreement is designed to resolve a clash between the countries that has seen a number of Swiss banks, such as UBS and Wegelin, subject to heavy penalties and in UBS’s case in 2009, hand over client data to the US in a historic breach of bank secrecy laws in Switzerland. A number of Swiss banks no longer provide offshore bank services to wealthy US clients.

“The chosen solution defines the framework for Swiss banks' cooperation with the US authorities. It respects Switzerland's legal system and sovereignty,” the Swiss government said in a statement on its website today.

The joint statement was signed by the Ambassador of Switzerland in Washington, Manuel Sager, and James Cole, Deputy Attorney General in the US Department of Justice. The US programme, the terms of which have also been published, enters into force on the date of signature of the joint statement.

The agreement contains three components: the joint statement between the Swiss and US governments, the unilateral US programme in which banks can participate voluntarily, and on the Swiss side, the model authorisation of 3 July, 2013, which governs banks' cooperation with the US authorities.

Withers, the law firm, pointed out that US taxpayers with any remaining Swiss accounts need to move fast.

"Following the agreement of the new disclosure deal, US taxpayers will need to act with some urgency if they have any undisclosed accounts that are, or were previously, held in Switzerland. US taxpayers disclosed to US authorities under this new program are very likely to have the IRS-sanctioned compliance procedures - such as the Offshore Voluntary Disclosure Program and the more recent streamlined disclosure procedure - closed off to them, which may result in much higher penalties and even exposure to criminal prosecution,” Michael Parets, partner in the Zurich office of the law firm, said.

The Swiss government said the agreement “enables Swiss banks to resolve past issues in a clearly defined framework. It respects the Swiss legal system, does not create any retroactive regulations and does not involve emergency legislation”.

“Banks that decide to participate in the US programme will have to ask the Federal Council for individual authorisation in accordance with Article 271 of the Criminal Code. However, this authorisation does not apply to client data, which can be provided only within the scope of administrative assistance based on the double taxation agreement of 1996 and the protocol of 23 September 2009, once the latter enters into force,” the statement continued. “Banks must comply with applicable Swiss law within the scope of their cooperation with the US authorities, particularly concerning data protection and employment law provisions. These principles have been expressly set out in the Federal Council's model authorisation.”

The government said the US programme is open to all Swiss banks, excluding those banks which are the target of criminal investigations by the Department of Justice (also known as category 1) Banks in category 2 - which have good reasons to believe that they have violated US tax law - may request a non-prosecution agreement from the US authorities up to 31 December, 2013 at the latest. They must then supply the US authorities with information on their cross-border relations, particularly leaver lists, but not the names of clients, the government said.

Institutions in category 2 must also pay a fine, the amount of which will be in relation to the volume of untaxed US assets they hold and the date on which the accounts were opened. The fines amount to 20 per cent for accounts which existed on August 1 2008, and 30 per cent for accounts opened between 1 August, 2008 and 28 February, 2009, it said.

If a bank opened an account with untaxed US assets after 28 February, 2009, the fine will be 50 per cent, it continued.

The statement added that banks which believe that they have not violated US tax law (category 3) and those whose business is local in nature (category 4) can report to the US authorities between 1 July, 2014 and 31 October, 2014 at the latest to request a non-target letter.