The Swiss House of Representatives have voted in favour of a law requiring Swiss banks to report the holdings of their US clients to US tax authorities under FATCA in a move to smooth ties with Washington.
The members of the Swiss Parliament have approved the divisive bill by 112 votes to 51, with 21 abstentions.
The law, which has been approved by the upper house of the Swiss parliament still needs to bounce back for a final stamp of approval, which is set to take place next July, the ATS news agency reported.
By complying with the law, Swiss hopes to finally settle a dispute with Washington over Swiss banks’ role in tax evasion by US citizens.
Switzerland has agreed to comply with FATCA, which aims to ensure that all US citizens can be taxed by the Internal Revenue Service on their income and assets worldwide. FATCA also requires foreign financial institutions to report all assets in accounts held by US citizens to the IRS.
Swiss banks are believed to have accepted tens of billions of undeclared dollars from US citizens, though they now refuse such money.
The deal provides Swiss banks the opportunity to avoid US prosecution if they agree to hand over information on US citizens’ accounts and to pay an appropriate fine, assessed at 20-50% of the value of undeclared accounts.
The deal ensures that information cannot be transferred automatically without the client’s consent but if a client refuses consent, information can still be exchanged, but only through group requests under an existing double taxation agreement between Swiss and the US.
"The FATCA bill will be implemented in stages starting in July 2014," finance minister Eveline Widmer-Schlumpf said.