Foreign Account Tax Compliance Act (FATCA)
FAQ - General questions
As a mean to help counter tax evasion from the United States, the United States Department of Treasury (the “Treasury”) and the United States Internal Revenue Service (the “IRS”) have worked together to introduce, in 2010, the Foreign Account Tax Compliance Act (“FATCA”), which came into effect on 30 June 2014.
Associated inter-governmental agreements (“IGAs”) were entered into by the United States with other jurisdictions concerning the implementation of FATCA, which results in the FATCA legislation to become part of these jurisdictions’ local laws. On 14 February 2013, Switzerland and the United States (the “U.S.”) signed such an IGA, which came into effect on 30 June 2014.
The focus of FATCA is the reporting of information on a cross-border basis from a non-U.S. bank directly to the IRS (Model 2 IGA) or indirectly via their local tax authorities (Model 1 IGA) with regard to all non-U.S. accounts held by U.S. Persons, in order to prevent them from using non-U.S. financial institutions and other financial organisations to avoid U.S. taxation on their incomes and assets.
FATCA sets out strict procedures which must be followed by non-U.S. financial institutions in order to gather, and where necessary report directly or indirectly, this tax information to the IRS.
In Switzerland, a direct reporting is made by financial institutions as Switzerland signed a Model 2 IGA.
As a financial institution, Swissquote Bank SA (hereafter referred to as “the Bank” or “we”) is required to gather certain tax information about all of its clients. Where we determine that you are a U.S. Person, we will be required to report directly certain information about your account (refer to Q11 for further details) to the IRS on an annual basis.
As mentioned under Q1, this tax information will be reported according to the IGA between Switzerland and the U.S. However, you should note that under FATCA there is no withholding of tax (i.e. FATCA is purely an information reporting process), except in certain rare cases.
Over 110 jurisdictions already comply with FATCA, including all major finance centers.
For a complete list of jurisdictions that comply or have committed to comply with FATCA, together with information on the dates that they started reporting or they will start reporting information, please refer to the Treasury FATCA Resource Center.
FATCA took effect in Switzerland as of 30 June 2014 and the first reporting took place in 2015 (in relation to the information of the calendar year 2014).
All foreign financial institutions (FFIs) – including non-U.S. banks, brokers, insurance companies and asset management businesses – in participating jurisdictions (refer to Q3 for further details) are required to comply with FATCA.
FATCA affects both individuals and entities (incl. trusts, foundations, partnerships or corporations) considered as U.S. Persons for U.S. tax purposes, as well as some entities controlled by owners considered as U.S. Persons (the “Controlling Persons”). Where entities are concerned, it is necessary to determine their classification for FATCA purposes (being either a Financial Institution, Active Non-Financial Entity or Passive Non-Financial Entity), according to strict criteria laid down in the FATCA rules.
For account opened on or before 30 June 2014 (a “Pre-existing account”), we will review the information already available in the Bank’s records and we will only contact you to request additional information if we are missing certain information or if we have any doubts as to your FATCA status.
For accounts opened on or after 1 July 2014 (a “New account”), all necessary information is collected from you at the time the account is opened.
If you request the opening of a New account, i.e. on or after 1 July 2014, but fail to provide the Bank with the necessary information required under FATCA, the Bank will refuse to open your New account.
If your account is a Pre-existing account, i.e. was opened on or before 30 June 2014, and you fail to provide us with any additional information that we may subsequently request in order to determine your FATCA status, your account will be classified as a Non-consenting account and we may be required to report your account to the IRS where we have information that reasonably indicates that you may be a U.S. Person (refer to Q7 for further details). You are therefore strongly advised to provide us in a timely manner with all information that we may request, in order to ensure that your information is not reported incorrectly under FATCA.
If you are considered as a U.S. Person for U.S. tax purposes, then information on your account is reported to the IRS.
Where required, the information that will be reported to the IRS under FATCA includes the following, depending on your FATCA classification:
- In the case of an individual account holder, their name, address, date of birth and Tax Identification Number (TIN);
- In the case of an entity account holder that is not itself a Financial Institution, the name, address and Tax Identification number (TIN) and, if the entity is classified as a non-financial foreign entity (Passive NFFE) for FATCA purposes, the name, address, date of birth and Tax Identification Number (TIN) for each Controlling Person;
- The account number;
- The name, the GIIN and the QI-EIN of the Bank;
- The account balance or value at 31 December of each calendar year;
- The gross proceeds generated from the disposal or redemption of assets during the calendar year;
- and The gross amount of all dividends, interest and other amounts paid or credited to the account during each calendar year.
Yes, your account will be reported the following year for the current year, even if you close it now or later.
Each year as long as you are considered a U.S. Person, unless you close your account. In this later case, your account will be reported the following year only.
You are required to inform us of any changes to your circumstances that might have an impact on the information that would be reported under FATCA. For example, this includes in a non-exhaustive way (i) any change to your residence or nationality, (ii) any change to your Tax Identification Number (TIN) and (iii), in the case of an entity, any changes of Controlling Persons or any changes in the residence or nationality of any Controlling Persons.
We will use our best endeavours to inform our clients prior to the first occurrence of reporting of their account(s) pursuant to FATCA.
Yes, you can request a statement detailing the information sent to the IRS by the Bank. The statement is produced for a fee of CHF 20 and only once the reporting is done which means after 31 July of each year.
The FATCA statement cannot be reconciled to the tax statement or portfolio statement, as the principles used to produce the three different statements are not the same. The FATCA statement represents an indicative value of the client’s assets (i.e. the gross value of assets at the end of the calendar year (i.e. securities and cash), the gross amount of all sales and redemption and the gross income received during the concerned year) and is used by the IRS only as an indication of the client’s situation. It can therefore not be used to infer tax amounts to be paid.
Generally, the information reported may only be made available to the IRS and may only be used for tax purposes.
Data protection and confidentiality are a key part of FATCA. There are detailed rules which provide for strong data safeguards to be in place before Switzerland entered into an IGA agreement with the U.S. In addition, the Bank is not allowed to share the received information with any financial institution or foreign local governmental institutions; the information can only be used for tax purposes. However, the Bank may be requested to share some information with the Swiss Financial Tax Authorities (the “SFTA”) upon request.
We will respect your data privacy. We will only disclose your FATCA information if we are legally required to do so.
FATCA does not affect the operation of AEOI because the two regimes will run simultaneously.
Further information on FATCA can be found on the following websites:
Swiss State Secretariat for International Financial Matters (SIF) – FATCA website
If you have any questions regarding the impact of FATCA on you, you should contact your tax advisor.
This document is for information purposes only and does not constitute advice of any kind, particularly of a tax nature. It can be modified at any time, in particular following a modification of the laws or the practice of the competent authorities.