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Swiss Parliamentary Committee Backs FATCA IGA

by Ulrika Lomas,, Brussels

28 June 2013

The Swiss Committee for Economic Affairs and Taxes of the National Council (CER-N) has backed the Foreign Account Tax Compliance Act (FATCA) Model 2 agreement (IGA) with the US. The IGA has already been adopted by the Swiss Council of States.

In its statement, CER-N emphasized that the accord did not "arouse the enthusiasm" of the Committee. However, after weighing up both the advantages and the disadvantages of the treaty, and having evaluated the possible repercussions of rejecting the deal for Switzerland, the majority finally gave the green light to the agreement, by 13 votes to six with five abstentions.

Defending its decision, the Committee highlighted the fact that the unilateral US FATCA legislation is to enter into force anyway on January 1, 2014. It is therefore very much in Switzerland's interests to adopt the IGA with the US, to ensure that the Confederation reaps the benefits of certain exemptions provided for in the accord, the Committee argued, notably the exemption accorded to insurance companies and to Swiss retirement plans for example.

Refusing to provide their support in Committee, opponents of the accord warned that the legislation impinges on Swiss sovereignty. Others called for an amendment to be introduced, providing that the Federal Council is to re-open negotiations with the US, in the event that the automatic exchange of information becomes the international standard, and to move to a Model 1 IGA.

FATCA requires foreign financial institutions (FFIs) to register with US tax authorities and report information on accounts housing the assets of US taxpayers. Failure by an FFI to sign an agreement with the Internal Revenue Service (IRS) and disclose information would result in a requirement, from next year, to withhold 30 percent tax on US-source income.

The Model 1 treaty provides for the automatic exchange of information between the US tax authorities and the treaty partner state, on accounts held in treaty partner state financial institutions by citizens and residents of the US. Since the Model 1 IGA is reciprocal, the rules will also apply in the reverse direction.

Model 2 merely agrees that the country concerned will ensure that its laws and regulations permit its FFIs to perform the reporting procedures laid out under FATCA.

TAGS: Foreign Account Tax Compliance Act (FATCA) | tax | interest | FATCA | law | insurance | retirement | Internal Revenue Service (IRS) | legislation | Switzerland | United States | regulation | Compliance | Tax

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