Son of FATCA – Swiss/U.K. Agree on Information Exchange

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In what is clearly the first of many to come intergovernmental agreements similar to the Foreign Account Tax Compliance Acct (FATCA) adopted by the U.S. in 2010, the governments of Switzerland and the United Kingdom entered into an agreement with features similar to FATCA provisions. According to Thomson Reuters Checkpoint the key elements of the Swiss-U.K. inter-governmental agreement are as follows:

“Pursuant to a tax cooperation agreement between Switzerland and the U.K. that entered into effect on January 1, Switzerland will withhold U.K. tax on the income of U.K. residents held in Swiss banks at the rate of 40 percent on dividends, 48-50 percent on interest, and 27 percent on capital gains. Additionally, a one time deduction of 21 to 41 percent tax will be applied to balances in Switzerland to settle potential past tax liabilities arising before 2013. Withholding will not apply to account holders who instruct the Swiss bank to disclose the account information to the U.K. tax authority. The agreement is similar to the Foreign Account Tax Compliance Act (FATCA) Model II intergovernmental agreement in that Swiss banks would disclose information about U.K. account holders directly to the U.K. tax authorities. Swiss banks would also have to carry out the withholding of the U.K. tax on the accounts affected. ”

The Swiss government is under significant pressure to strip Swiss banks of their ability to aid international tax evasion schemes. Many other governments are likely to face similar pressure from the global financial regulatory community which is acting in concert through the Organisation for Economic Cooperation and Development (OECD). Depositors who have accounts in other “tax haven” jurisdictions will surely wake up to the fact that in the near future the shroud of secrecy that they relied upon could bury them in tax evasion criminal charges and/or civil tax fraud penalties from more than one jurisdiction. Take for example a dual citizen, someone who has citizenship in the U.K. and the U.S. and has undeclared accounts in Switzerland. That taxpayer may now face disclosure to the U.K. or U.S. first, and then based upon an already in place Intergovermental Agreement between the U.S. and the U.K. face prosecution in one or both countries.

The data tracking capabilities of the U.S. and other countries when fully deployed will surely make disclosure the best choice. There is still time to come forward and participate in the IRS Offshore Voluntary Disclosure Program (OVDP). But, as the certainty of discovery increases, the longevity of the OVDP may be in doubt.

 

Topics:  EU, FATCA, Intergovernmental Agreements, OVDP, Tax Evasion

Published In: Finance & Banking Updates, International Trade Updates, Tax Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Sanford Millar, Law Offices of Sanford I. Millar | Attorney Advertising

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Sanford Millar
Law Offices of Sanford I. Millar

Experience and Qualifications: Over 30 years of experience in domestic and international tax... View Profile »


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