Joint Statement between Switzerland and U.S. – Framework for Cooperation
|June 22, 2012||Posted by admin under FATCA, Switzerland, United States|
On June 21, the United States and Switzerland released a Joint Statement regarding a Framework for a Cooperation Agreement to facilitate the implementation of FATCA. The elements of this Framework are generally equivalent to those outlined with Japan; however, there are differences.
Generally, Swiss financial institutions would be directed to enter into FFI agreements directly with the IRS. Reporting of U.S. accounts would be permitted. Specific types of Swiss FFIs or financial schemes (including certain small, local FFIs and pensions) would be treated as deemed compliant or exempt. Swiss financial institutions would be identified as participating FFIs or deemed compliant and not subject to FATCA withholding.
Like the Japanese Framework, the obligation to withhold on foreign passthru payments is substantially reduced; however, it would still be required in the case of non-compliant FFIs in jurisdictions which have not entered into an Intergovernmental Approach agreement or an agreement such as the Swiss-U.S. Framework. In addition, an FFI will not be required to terminate accounts of recalcitrant account holders, but appear to be required to withhold 30% on U.S. source payments to that account holder (N.B., the Japanese Joint Statement provides withholding relief on “passthru payments” while the Swiss statement only provides withholding relief on “foreign passthru payments”).
Key Elements of the Swiss Framework
A. The United States and Switzerland would enter into an agreement (the “Cooperation Agreement”) pursuant to which, subject to certain terms and conditions, Switzerland would agree to:
1. Direct all Swiss financial institutions, not otherwise exempt or deemed compliant pursuant to the Cooperation Agreement, to conclude an FFI Agreement with the U.S. Internal Revenue Service (IRS).
2. Enable these Swiss financial institutions to comply with the obligations prescribed by the FATCA rules and set forth in such FFI Agreements, in particular regarding the reporting of information with respect to U.S. accounts to the IRS, by granting an exception from Article 271 of the Swiss Criminal Code.
3. Accept and promptly honor, as foreseeably relevant without regard to any other condition, a group request by the U.S. competent authority for additional informa- tion about U.S. accounts identified as recalcitrant and reported by Swiss financial institutions on an aggregate basis, pursuant to Article 3 of the Protocol signed on September 23, 2009.
B. In consideration of the foregoing, the United States would agree to:
1. Identify in the Cooperation Agreement, specific categories of Swiss FFIs or schemes (in particular certain small, local FFIs and institutions/schemes in the field of the Swiss pension system) that would be treated as deemed compliant or exempt;
2. Eliminate U.S. withholding under FATCA on payments to Swiss financial institutions (i.e., by identifying all Swiss financial institutions as participating FFIs or deemed-compliant FFIs, as appropriate); and
3. Agree to certain other appropriate measures to reduce burdens and simplify the implementation of FATCA.
C. In addition, as a result of the Cooperation Agreement, Swiss financial institutions would not be required to:
1. Terminate the account of a recalcitrant account holder;
2. Impose foreign passthru payment withholding on payments to recalcitrant account holders, or to other financial institutions in Switzerland, or in another jurisdiction with which the United States has in effect either an agreement for an intergovern- mental approach to FATCA implementation, or an agreement for intergovernmen- tal cooperation to facilitate FATCA implementation.
D. A model Cooperation Agreement implementing this framework for intergovernmental cooperation to facilitate FATCA implementation will be developed and the terms and conditions established in the model agreement will be applied to Switzerland and other interested countries on an equivalent basis.
E. The United States and Switzerland agree to work swiftly and constructively to nego- tiate and conclude a Cooperation Agreement.