On July 17, 2019, the US Senate approved the long-overdue 2009 protocol to the Swiss-US double tax treaty, the core element of which concerns administrative assistance.
Formally, the protocol will enter into force once the instruments of ratification are exchanged, which is likely to happen in the course of the coming months.
Key provisions of 2009 protocol
Most notably, the protocol brings the following changes:
- It will allow the US to make group requests under FATCA concerning non-consenting US accounts and non-consenting NPFFIs. While it remains to be seen when the IRS will start submitting these group requests, affected Swiss financial institutions should prepare the relevant data now. Once the Swiss Federal Tax Authority receives the group requests and forwards them to the financial institutions, the financial institutions only have 10 days to respond and deliver the data.
- Further, the protocol generally erases the differentiation between tax evasion and tax fraud in the context of administrative assistance and will also apply to other types of information requests, e.g. the ones made by the US in connection with data that was provided to the US DOJ in the context of the Swiss bank program.
- For pillar 3a solutions, it will provide for a withholding tax exemption in relation to dividends from US stocks (while they currently suffer a 15 % withholding tax).
- It implements dispute resolution through mandatory binding arbitration, in case the competent authorities cannot conclude in the mutual agreement procedure.
The approval of the protocol finally paves the way for negotiations about future revisions of the treaty, most notably a potential withholding tax exemption for qualified dividends to corporate shareholders, which would make Switzerland an even more attractive location for US multinationals.