Switzerland signs Tax Disclosure Agreement with IRS
Feb 15, 2013 Article #190 Author: Peter S. Muffoletto, C.P.A.
The Long Arm of the IRS is reaching out Worldwide!
Switzerland and the United States have signed a tax treaty in which Swiss banks will disclose information about U.S. account-holders.
The agreement is the latest in a series between the United States and other countries designed to carry out the Foreign Account Tax Compliance Act, or FATCA, enacted in 2010.
With this agreement Swiss banks will disclose directly to the U.S. Internal Revenue Service all activity relating to U.S. Taxpayers holding assets in Swiss accounts.
FATCA requires foreign financial institutions to tell the U.S. Internal Revenue Service about Americans' offshore accounts worth more than $50,000.
The incentive for the Swiss to comply with this agreement is that under FATCA which imposes steep penalties beginning in 2014 on foreign financial institutions that do not comply with the law, Swiss banks avoid the financial penalties and potential ban from operating in U.S. financial markets.
Also aligned in several other international banking agreements are Britain, Denmark, Ireland, and Mexico. South Africa, Luxembourg, Austria, and Japan are also considering entering into agreements with the U.S. as to banking disclosure.
The U.S. Treasury is working with more than 50 countries to complete agreements although negotiations have not progressed with key U.S. trading partners Canada and China.
Interestingly the Swiss deal does not require Swiss banks to automatically give the IRS account-holder information if the U.S. client refuses to cooperate, but the IRS can circumvent this by obtaining the information via Swiss government authorities.
The agreement is not reciprocal in that the IRS will not provide Switzerland with information about Swiss citizens' accounts in U.S. banks.
It appears that you can run, but you cannot hide from the IRS!