Switzerland and the US sign updated FATCA agreement – Impacts for US taxpayers in Switzerland - Tax and Legal blog

GES-Hero-Image_1200x627-(events-banner)

In a significant move towards financial transparency and cooperation, the United States and Switzerland have recently agreed on a new Foreign Account Tax Compliance Act (FATCA) agreement. This agreement, signed on 27 June 2024, marks a shift from the previous Model 2 to Model 1, which allows for an automatic mutual exchange of financial account data between the two nations. The change is expected to come into effect in 2027.

Individual taxpayers and financial institutions of both countries need to be aware of these changes and their implications. Both jurisdictions will have greater visibility on the accounts of financial institutions and private individuals, highlighting the importance of remaining compliant on all tax filing and asset reporting obligations.  

The Foreign Account Tax Compliance Act (FATCA) is a set of US regulations that requires foreign financial institutions to disclose information on US accounts to the Internal Revenue Service . Since 1 January 2014, FATCA has been applied worldwide.

The implementation of FATCA in Switzerland was previously based on Model 2, under which Swiss financial institutions disclosed account details directly to the US tax authority with the consent of the US clients concerned. However, under Model 2, account data was only transmitted from Switzerland to the United States.

The new agreement, signed by United States Ambassador Scott C. Miller and Swiss Ambassador Nicole Krenger, Head of the Tax Division at the Swiss State Secretariat for International Finance (SIF), introduces a switch from Model 2 to Model 1.

Under Model 1, the tax authorities of both countries will mutually exchange information on account data automatically. This means that Switzerland will also receive account data from the United States in the future. Swiss financial institutions will no longer provide the required data to the US authorities, but rather to the Swiss Federal Tax Administration (FTA), which will then transmit it to the Internal Revenue Service (IRS) in the US.

The shift to Model 1 is expected to increase financial transparency between the US and Switzerland. It helps to address administrative impediments, reduces burdens for Swiss financial institutions, and improves international tax compliance. This is a significant step towards improving international tax compliance and strengthening ties between the United States and Switzerland. It is essential for citizens/tax residents and financial institutions of both countries to understand these changes and their implications.

Separate from the impact on Swiss financial institutions, US citizens/tax residents living in Switzerland may see more scrutiny around reporting of financial assets held in the other country.

As the US-Swiss Model 1 FATCA agreement comes into force on 1 January 2027, it further reinforces the need for Americans living and working in Switzerland to remain compliant with their US tax affairs. This includes both their annual US income tax return (Form 1040) as well as their Foreign Bank & Financial Accounts “FBAR” (FinCEN 114).

Deloitte’s dedicated team of tax professions based in Switzerland helps US persons living in Switzerland navigate the ever-increasing challenges of US tax compliance and is ready to support you.

If you would like to know more about this topic and receive the support of our team of experts in this field, please reach out to our key contacts below.

Key contacts

Jack J. Nettis III - Senior Manager, Global Employer Services

Jack joined the Global Employer Services (GES) team in Switzerland in 2016 after transferring from the Deloitte US GES practice. He specializes in US individual income taxes with additional experience with global mobility HR and payroll consulting. Jack has been involved with global mobility for over 15 years serving a variety of international organizations with a focus on the western European market. He holds a Bachelor of Business Administration and Master of Business Administration from Ohio University and is US Certified Public Accountant.

Email

Saluveer_BLOG

Alex Saluveer - Senior Manager, Global Employer Services

In a career spanning more that 20 years, Alex has worked in the field of international expatriate tax, reward consulting and global mobility in London, New York, Paris, Sao Paulo and Geneva. Alex has led global as well as country specific engagement teams within a varied client base providing advice in respect of individual tax matters as well as employer responsibilities. He has worked extensively in assisting organisations deploy international incentive and deferred compensation plans, and he also has widespread experience in US individual taxation having worked with US executives throughout his career. Alex holds a Master’s Degree from the University of Cambridge.

Email

Travis picture (002)

Travis Sakos - Manager, Global Employer Services

Travis has been with Deloitte Global Employer Services since 2018. His focus area is US tax consulting and compliance services, with particular emphasis on foreign asset disclosures, foreign entity reporting, tax equalization programs, and foreign pension considerations. 

Email

Andrew

Andrew Eledge - Senior Consultant, Global Employer Services

Starting his career with Deloitte in 2020, Andrew has a strong track record in providing tax consultancy services for multinational companies, international organizations, and high net worth individuals alike. As a licensed CPA of Arizona, he has extensive experience in liaising with the IRS and state revenue agencies to resolve taxpayers’ issues. Along with his bilingual native-level English and German language skills, he provides valuable US tax consulting and compliance services to a US persons. 

Email

Comments

The comments to this entry are closed.