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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 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.
The Act has already prompted some international financial organisations to stop
providing services to expat Americans.