Switzerland and the U.S. initialed an agreement to implement procedures for sharing American account holders’ cross-border bank information under an anti-tax-evasion law scheduled to take effect next year.
“The accord guarantees that accounts held by American taxpayers with Swiss financial firms will be declared to the U.S. tax authorities,” the Swiss federal government said today in an e-mailed statement.
Under the Foreign Account Tax Compliance Act, or Fatca, overseas banks worldwide will be required to inform the Internal Revenue Service annually about the balances and activity in their U.S. customers’ accounts. The U.S. can impose a tax on some U.S.-related payments being sent to financial institutions outside the country that don’t comply with the rules.
While banks in some countries will report information to the U.S. via their own governments, Swiss financial firms are expected to deliver information directly to the IRS to avoid entering into a system of automatic exchange of information.
The agreement initialed yesterday won’t be published until it’s signed by the two nations, Anne Cesard, a spokeswoman for Switzerland’s State Secretariat for International Financial Matters, said in a phone interview from Bern.
Social insurance, pension provision and property and casualty insurance are exempt from the scope of Fatca, according to the Swiss government statement.
The U.S. will still be allowed to submit group requests for administrative assistance on Americans suspected of having undeclared money in Swiss bank accounts. Group requests, which allow U.S. authorities to obtain data without knowing client identities, may smooth the way for Swiss banks to hand over information without the risk of legal action.
Switzerland, the world’s biggest center for offshore wealth, is trying to change its image as a haven for undeclared assets following a crackdown on tax evasion by U.S. authorities. The U.S. Department of Justice has been investigating at least 11 Swiss financial firms suspected of helping Americans hide money from the IRS.
Implementing Fatca is a separate issue to the DoJ probe and talks held yesterday in Washington were confidential, Cesard said.