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Switzerland Signs Deal With US To Simplify How FATCA Act Operates

Tom Burroughes

5 December 2012

Switzerland and the US have signed an agreement that simplifies how the controversial US FATCA Act is to be put into force.

The simplifications apply in particular to Social Security, private retirement funds and casualty and property insurances, which are exempt from FATCA, as well as to the due diligence requirements of financial institutions, according to a statement from Switzerland’s Federal Department of Finance.

The Foreign Account Tax Compliance Act, which went into effect on March 2010, says all income from accounts held abroad by persons liable to pay taxes in the US must be disclosed for US tax purposes and as such, what are called foreign financial institutions must report identified US accounts or pay a 30 per cent withholding tax.
The Act has already prompted some international financial organisations to stop providing services to expat Americans.

The Swiss government said the simplified agreement with the US covers the following sectors in Switzerland:

-- Social Security, private retirement funds as well as casualty and property insurances are exempt from the application of FATCA;

-- Collective investment vehicles as well as financial institutions with a predominantly local clientele are deemed, under certain requirements, to be FATCA-compliant and are subject only to a registration obligation;

-- The due diligence obligations on the identification of US clients to which the rest of the Swiss financial institutions are subject are created in such a way that they can reduce the administrative burden.

“The agreement ensures that accounts held by US persons at Swiss financial institutions are reported either with the consent of the account holder or by administrative assistance channels through group requests.  If consent is not given, the information will not be exchanged automatically , but only on the basis of the administrative assistance provision in the Swiss-US Double Taxation Convention,” a statement from the Swiss government said.

The agreement is subject to the approval of the Swiss Parliament and to an optional treaty referendum, the statement added.