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FATCA

The Foreign Account Tax Compliance Act (FATCA) is intended to enforce US taxation around the world. The legislation is designed to ensure that all foreign accounts and investments held by US taxpayers are disclosed. In December 2012, Switzerland and the US initialled a bilateral agreement to enforce the new US legislation in Switzerland. SAAM representatives supported the Swiss State Secretariat for International Financial Matters during the FATCA negotiations and are also present in the FATCA advisory group, thereby ensuring that the interests of independent asset managers are not forgotten in the intensive discussions. Under the bilateral agreement, every financial institution based in Switzerland will have to conclude an agreement with the US Internal Revenue Service (IRS). The agreement will include due diligence and disclosure requirements.

 

The agreement between Switzerland and the United States on cooperation to simplify the implementation of FATCA entered into force on 2 June 2014. The Federal Council brought the corresponding implementing act into force on 30 June 2014.

 

FATCA implementation in Switzerland is based on Model 2, which means Swiss financial institutions will disclose account details directly to the US tax authority with the consent of the US clients concerned. On 8 October 2014, the Federal Council adopted a mandate to negotiate with the USA on converting the FATCA Agreement to Model 1, which provides for the automatic exchange of information between the respective authorities.  It currently remains unclear when an agreement to this effect will be reached.

 

For independent asset managers in Switzerland, FATCA introduces the following major changes:

 

Registration requirement

 | All asset managers engaged in that activity as their main profession must now register with the US tax authorities. An exception is made only for single-member companies. Detailed information on the specific registration options and associated requirements can be found here.

 

Certification as alternative

 | As an alternative to registration, there is the option of using form W8-BEN-E to be certified for all custodian banks with which one works (this grants the status of "certified deemed-compliant foreign financial institution").

 

Online registration had to be completed by 5 May 2014 in order for independent asset managers to be considered "FATCA-compliant" at the time the agreement entered into force. Upon registering, asset managers obtain a "Global Intermediary Identification Number" (GIIN). Since 1 July 2014, this number has been required of all custodian banks with which an asset manager has dealings, unless the latter submits the appropriate certification document instead.

 

Special activities

 

 | Ancillary trustee and fiduciary activities will either have to be regulated through an additional agreement with the IRS or the custodian bank can choose to operate as an intermediary and stand guarantor for the independent asset manager.