by Brian Mahany
Some are probably looking at the title and thinking that I must have missed a word or, perhaps, lost my mind. No, you read the title correctly; Switzerland Agrees To FATCA.
Although no formal agreement has been signed, the U.S. Treasury Department issued a press release indicating both nations had initialed an agreement to implement FATCA. For those new to this blog, FATCA stands for the Foreign Account Tax Compliance Act. Beginning in 2014, banks and other foreign financial institutions must identify and report account holders with ties to the United States. The measure is designed to insure that U.S. taxpayers properly identify their Swiss and other foreign accounts.
The agreement is a bit different than that negotiated with other nations. Swiss bankers have been torn between supporting Switzerland’s well known banking secrecy laws and fending off a number of criminal charges, fines and investigation by U.S. Justice Department and IRS officials.
The proposed agreement requires the due diligence requirements to identify Americans with Swiss accounts or the ability to sign on Swiss accounts be created to reduce the administrative burden on the banks and other financial institutions. Certain asset classes such as social security, private retirement and insurance products would be deemed exempt.
The devil is always in the details but those should be worked out shortly. The agreement must be ratified by both countries. The Swiss parliament is expected to consider ratification in January.
Owning a Swiss account is completely legal as long as it is reported annually on a Report of Foreign Bank and Financial Accounts or FBAR form. Interest, profits or dividends must be reported too. Many dual nationals have foreign accounts and simply don’t understand the foreign reporting requirements. Some taxpayers, however, have deliberately hid money in Swiss accounts hoping to evade tax reporting and payment obligations. For those folks, the penalties can be severe.
Willfully failing to file an FBAR is a felony. The civil penalties are also huge. FATCA aims to make foreign banks and brokerage houses the eyes and ears of the IRS. In little more than a year, those institutions will be required to look through those accounts and identify those with indicia of American ownership.
For bankers in Switzerland, that could be a difficult challenge and see many accounts be closed or transferred before FATCA come on line. With Switzerland now on board, the financial world just became much smaller and more transparent.
The tax lawyers at Mahany & Ertl have helped many taxpayers with a wide variety of offshore reporting requirements. From unfiled FBARs to FATCA compliance to participation in the various amnesty programs (including the 2012 Offshore Voluntary Disclosure Program or “OVDI”), we can help.
We do offer a word of caution. Anyone even considering amnesty or negotiating directly with the IRS should note that the IRS operates on a first contact policy. If your money is hidden in a Swiss bank, consider amnesty before the IRS finds you first. if they do, all bets are off.
Mahany & Ertl – America’s Tax Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine; Minneapolis, Minnesota and coming soon, San Francisco, California. Services available worldwide.