New FATCA agreement between the U.S. and Switzerland

The Swiss Confederation and the United States on June 27 signed a new FATCA (Foreign Account Tax Compliance Act) agreement in Bern. Currently, Switzerland unilaterally transmits financial information to the United States. Under the new agreement, which is scheduled to enter into force on Jan. 1, 2027, this information will be exchanged automatically with each other.

To date, Switzerland operates under Model 2, in which Swiss financial institutions report data on U.S. clients' accounts, with consent, directly to the U.S. tax authority, and, in the absence of consent, the U.S. must follow the ordinary administrative assistance procedure. The United States, for its part, does not currently share account data with Switzerland.

In October 2014, the Federal Council decided to switch to automatic exchange of information, instructing the Federal Department of Finance to negotiate with the United States to switch from Model 2 to Model 1. Under Model 1, tax authorities in the two countries will automatically exchange information on financial accounts. Swiss financial institutions will transmit the data to the Federal Tax Administration, which in turn will forward it to U.S. authorities.

This new agreement is a significant step toward greater international tax transparency and cooperation, and we are available for any clarifications we may have to elaborate.