Under the FATCA agreement, the Swiss government would enable all Swiss FFIs to register with the IRS by 1 January 2014, and conclude the necessary FFI agreements to comply with the obligations prescribed by the FATCA rules, including its due diligence, reporting and withholding tax terms with respect to accounts identified as being held by US taxpayers.
The agreement will also help in ensuring that the accounts held by US persons at Swiss FFIs are reported either individually, with the consent of the account holder, or, if consent is not given, by administrative assistance channels through group requests.
Further, if consent is not given, the FFI would be able to provide aggregate information on all such accounts to the Swiss tax authority, which would then be authorized to transmit the group data to the IRS.
FATCA was enacted by Congress in March 2010 and is intended to ensure that the US tax authorities obtain information on financial accounts held by US taxpayers with foreign financial institutions (FFIs).
Failure by an FFI to sign an agreement with the US Internal Revenue Service (IRS) and disclose information would result in a requirement to withhold 30% tax on US-source income.
Currently, the agreement is subject to the approval of the Swiss Federal Council and Parliament and to an optional treaty referendum. It is expected to be in operation by January 1, 2014.