Further to my post last Sunday here at IBS, SWAT–Switzerland IGA: Still not enough information available in Switzerland, I received a reply email from the Swiss State Secretariat for International Financial Matters (SIF) yesterday. I stand corrected: it seems that I didn’t search hard enough on the Swiss Federal Authorities site (admin.ch) and that not only the agreement text is now available in Swiss national languages, but also a “law of application” has been drafted to enforce the agreement. From what I understand, Parliament will be formally informed of the package to vote on by 15 March 2013, but is not expected to vote on the issue until next summer. It would appear that the Cantons, Communes, Political Parties, etc. are expected to provide feedback by 15 March and this feedback will go to Parliament in some formal fashion, but of course this does not preclude lobbying directly to deputies outside of the formal consultation procedure between now and the vote next summer.
The responses from SIF were embedded in the body of the text of my original email to them, so I am reformatting for sake of simplicity. The following blockquote contains English translation of my original questions in Bold, SIF responses in Italics, and my translation of these responses in normal text.
*** 1st Email to SIF ***
I find it unusual that your press release does not contain links to final FATCA regulations and the text of the FATCA [IGA] agreement
– Vous trouverez le texte de l’accord en annexe du communiqué que vous mentionnez (http://www.admin.ch/aktuell/00089/index.html?lang=fr&msg-id=47779, cliquer à droite) ainsi que sur le site internet même du SFI (http://www.sif.admin.ch/themen/00502/00807/index.html?lang=fr; cliquer à droite).
“You will find the text of the agreement annexed to the press release that you mentionned…”
– En outre, les Final Regulations du Trésor américain figurent elles aussi sur notre site internet (tout en bas à droite) comme sur le site de la Chancellerie fédérale, auquel vous accédez via le communiqué (voir lien plus haut, cliquer sur « documents destinés à la consultation).
“You will find as well the FATCA Final Regulations of the American [Department of] Treasury on our internet site (right ‘sidebar’) as on the site of the Federal Chancellery where you accessed the press release ‘documents destinés à la consultation'”
The implications of FATCA in terms of its complexity as well as the dangers posed by its application require a deep analysis on the part of the Swiss People and its elected deputies in Parliament. It is also not evident if Parliament will debate the issue during the March 2013 session, or later. Would you have information about this?
– Le Conseil fédéral soumettra le message au Parlement une fois la consultation terminée (celle-ci échoit le 15 mars). L’examen parlementaire ne commencera donc qu’à la session d’été.
“The Federal Council will submit the message to Parliament as soon as the consultation is finished (deadline 15 March). Parliamentary debate shall therefore not commence before the Summer Session.”
Also, how can it be that the Federal Council signs such an agreement without obligatory referendum [popular vote] (Art 140a,b, 141a CFS) accompanied with the neccesary modifications to the Constitution, in light of the fact that FATCA is incompatible with multiple proections guarantied in the Constitution, for example: Freedom of economic activity, anti-discrimination, right to family? Let alone the law which deals with the question of dominant nationality (RS291 Art 23). If the FATCA agreement is approved, the result would be adhesion to a supernational community because the American judicial principle in tax matters ‘Last in Time Rule’ permits American authorites to change the rules of the game when they want, despite treaties, conventions, and agreements. And thus, the Federal Concil is not acting in good faith and does not want to protect the Swiss against arbitrary treatment (Art 9 CFS).
– La mise en œuvre de FATCA ne nécessite pas de modification de la Constitution. FATCA ne constitue pas une adhésion à une organisation supranationale. Le référendum facultatif est donc toujours possible.
Les institutions financières devront respecter les règles et leurs modifications futures. Toutefois, le texte de l’accord primera les règles détaillées si celles-ci sont en contraction avec l’accord.
“The implementation of FATCA does not require modifications to the Constitution. FATCA does not constitute an adhesion to a supernational organisation. Optional referendum is still possible.”
“Financial institutions will be required to respect the regulations and their furture modifications. In any case the text of the agreement will take precedence over the detailed regulations if these are in contradiction with the [IGA] agreement.” [Visibly Mrs Césard does not understand ‘Last in Time Rule’].
An acceptation of an extraterritorial foreign law such as FATCA is a clear violation of the constitutional mandate ‘The Swiss Confederation protects the liberty and the rights of the people and insures the independance and the security of the country.’ (Art 2 Line 1 Swiss Federal Constitution)
– Les établissements financiers mondiaux – et pas seulement suisses- devront appliquer FATCA à partir de 2014, indépendamment d’un accord conclu entre leur pays et les Etats-Unis, s’ils ne veulent pas être exclus du marché américain des capitaux. Cela concerne non seulement les grands établissements, mais aussi les petites et moyennes institutions, car les banques conformes à FATCA mettront fin à leurs relations d’affaires avec celles qui n’appliquent pas FATCA.
L’accord conclu entre la Suisse et les Etats-Unis prévoit des allégements importants pour les établissements financiers suisses dont ceux-ci seraient privés si l’accord n’entrait pas en vigueur.
“Worldwide financial institutions – and not just Swiss ones – will be required to apply FATCA starting in 2014, independanty of whether or not an agreement [IGA] is concluded between their country and the United States, if they don’t want to be excluded from American capital markets. This concerns not only large [financial] institutions, but also small to medium sized institutions, because banks that comply with FATCA will cease business relations with those that do not comply with FATCA.”
“The agreement concluded between Switzeralnd and the United States forsees important simplifications for financial institutions that they would not have if the [IGA] does not come into force.”
My original email was sent to email@example.com (+41 31 322 46 16), but was replied to by:
Départment fédéral des finances DFF
Secrétariat d’Etat aux questions financières internationales SFI
Bundesgasse 3, 3003 Berne
Tél. +41 31 322 62 91
Mobile: [redacted, I don’t want to upset her with calls from angry Brockers in the middle of the night… at least not yet]
Fax: +41 31 323 24 02
The Pending Consultations Page of the Swiss Federal website contains a number of links to documents destined for consideration by Parliament (you have to scroll down), here is a translation of the blurb paragraph and a copy of the links for convenience:
Agreement between Switzerland and the United States seeking to facilitate the implementation of FATCA and proposed federal law for the implementation of stated agreement
Authority: Federal Council [President and Cabinet] Form: Written Procedure
The agreement on FATCA (Foreign Account Tax Compliance Act) should permit the United States to effect the taxation of accounts held abroad by persons subjected in unlimited manner to US taxes [I don’t understand what ‘unlimited manner’ means here]. Switzerland has signed an agreement with the United States seeking to facilitate the implementation of FATCA within its territory. Certain obligations contained in the agreement must nonetheless be codified in a federal law.
Deadline date: 15.03.2013
Proposed Federal Law (French): http://www.admin.ch/ch/f/gg/pc/documents/2330/FATCA-mise-en-oeuvre_Loi-federale_Projet_fr.pdf
Text of the IGA (English): http://www.admin.ch/ch/f/gg/pc/documents/2330/FATCA-Implementation_Agreement_en.pdf
Text of the IGA (French): http://www.admin.ch/ch/f/gg/pc/documents/2330/FATCA-mise-en-oeuvre_Accord_fr.pdf
Report (French): http://www.admin.ch/ch/f/gg/pc/documents/2330/FATCA-mise-en-oeuvre_Rapport-expl_fr.pdf
Accompanying Letter to Cantons (French): http://www.admin.ch/ch/f/gg/pc/documents/2330/FATCA-mise-en-oeuvre_Lettre-Cantons_fr.pdf
Accompanying Letter to Communes, Political Parties, etc. (French): http://www.admin.ch/ch/f/gg/pc/documents/2330/FATCA-mise-en-oeuvre_Lettre-Org_fr.pdf
List of addressees to which these documents are being sent: http://www.admin.ch/ch/f/gg/pc/documents/2330/Adressaten_destinataires_destinatari.pdf
For further information: Silvia Frohofer / Eric Hess tél: 031 324 30 20 / 031 322 76 70 fax: 031 323 08 33 e-mail: firstname.lastname@example.org;email@example.com
Note: The consultation page does not appear to have an English version, but one can switch to German or Italian in the upper right-hand corner
For readers’ convenience, here is a link to the FATCA final regs: https://www.federalregister.gov/articles/2013/01/28/2013-01025/regulations-relating-to-information-reporting-by-foreign-financial-institutions-and-withholding-on Also a link to the Swiss Federal Constitution in English.
What I find shocking is that although they are present in the IGA text, nowhere in the proposed Swiss federal law for FATCA implementation do I see a direct mention of the thresholds as in the original FATCA law and the final regs, to wit:
Accounts exempt from review. The final regulations exempt from review entirely all preexisting accounts held by individuals with a balance or value of $50,000 or less. This threshold is raised to $250,000 for preexisting accounts held by entities and for preexisting accounts that are cash value insurance and annuity contracts. In addition, the final regulations exempt insurance contracts with a balance or value of $50,000 or less from treatment as financial accounts.
Source: 78 FR 5876 FATCA Regs Page on Federal Register Website
16.03 JDT: It would seem however following my in-depth reading of the Swiss application law that these thresholds might indeed be respected, and might even be in force for new accounts. The law contains numerous mentions of the annexes to the IGA, but I am not sure if such references to the annexes will override the clear interdiction of Art 7 of the Swiss application law on new accounts without TIN and consent. I will be preparing a new article here at IBS with my in-depth analysis as I do not want to base myself on the explainatory report (http://www.admin.ch/ch/f/gg/pc/documents/2330/FATCA-mise-en-oeuvre_Rapport-expl_fr.pdf) SIF provided, but rather on the texts of the application law, and the IGA itself.
As to the higher thresholds for USPs in bone fide residence abroad, this would seem to be only as regards the reporting requirements of the individual, not of the bank. See: http://www.irs.gov/PUP/businesses/corporations/Summary%20of%20FATCA%20Reporting%20for%20US%20Taxpayer.pdf under “Reporting Thresholds” i.e. for residents abroad aggregate value at end of the year of USD 200k filing seperately USD 400k filing jointly, or USD 600k at any time of the year.
Our task now is to work to bring all of the documents relevant to the consultation to the attention of all Swiss voters. Also, anyone that can read French, German or Italian, please analyse all the documents and make your critiques and conclusions. I would ask all Swiss Brockers to write their deputies (National Counselors=Lower Chamber, Counselors of State=Senate), cite the present post and the documents I presented links for from the consultation page above, and express your opinions about FATCA and its constitutionality both in the US and Swiss senses, as well as the problems it poses for normal working people just trying to survive and save for retirement. You can also write to the email addresses of the various people at SIF that I mentionned above. Also, I don’t see why non-Swiss Brockers worldwide couldn’t also write the same people in English complaining that Switerland must resist and if it does pehaps other countries will follow suit and tell Uncle Sam to get lost.
You can find the addresses of members of Parliament here: Deputies/National Counselors … Senators in the Council of States IMPORTANT: You must choose the Canton, click on the deputy’s or senator’s photo, then on Biography to get their email address. Brockers outside Switzerland might want to address their emails to deputies from Cantons containing big financial or international centers such as Geneva, Basel-City, Vaud, Zürich.
I will be copying this present post at IBS via email or blog to SwissRespect, ACA, AARO, Maple, CCLA, all major Swiss political parties, the FATCA Forum, Phil, Allison, Jack, Steven, Jim Jatras, etc. I will also be sending a followup email to SIF with some further questions, and will publish it in the comments below
This article is also interesting: “Federal Council launches two consultations on combating money laundering and on enhanced due diligence requirements in the area of taxation” http://www.sif.admin.ch/00488/index.html?lang=en&msg-id=47934
Also, as to the FATCA IGA, here is a Swissinfo article in English: http://www.swissinfo.ch/eng/politics/Tax_compliance_deal_signed_with_US.html?cid=34978646 as well as Jim Jatras:http://www.repealfatca.com/index.asp?idmenu=4&title=News&idsubmenu=116
In any of the Swiss materials, do you see that they anywhere referred to the IGA as having the status of a “treaty” in CH? The UK IGA is repeatedly described as a “treaty” on the HMRC site. I ask, because this could be a point of leverage in pending developments at the US Senate.
@Jim — My reading of the Swiss Constitution (http://www.admin.ch/org/polit/00083/index.html?lang=en) is that since a consulatation procedure has been launched and the Swiss parliament is expected to vote next summer, then the intention is that the IGA would be a treaty. Here are two articles from the Swiss Constitution upon which I base my judgement:
A treaty is generally called a “Staatsvertrag” (literally, government contract) in German, although it can also be more generally referred to as an “Abkommen” (agreement). Abkommen is the word used in the FATCA treaty/ agreement signed by the US Ambassador to Switzerland, Donald Beyer, and the Swiss Finance Secretary, Michael Ambühl.
In Switzerland, Staatsverträge must be approved by the parliament and then can be subject to a facultative referendum as provided by the Swiss constitution. (A facultative referendum can be initiated by the parliament or by a citizens’ petition with sufficient signatures).
Here are some indications that Switzerland consider the FATCA Abkommen to be Staatsvertrag (treaty):
KPMG FATCA News, Dec 2012, p.2:
“Das Abkommen unterliegt der Genehmigung durch die eidgenössischen Rechte und dem fakultativen Staatsvertragsreferendum.”
NZZ, Schnellzug für Umsetzung des Fatca-Vertrags, 14 February 2013:
The below discusses why a FATCA treaty is more desirable than none because it allows a country to negotiate on specific items:
“Staatsverträge der USA mit anderen Ländern bringen gewisse Erleichterungen in der Umsetzung, wie etwa Ausnahmen für Pensionskassen, Sachversicherungen und gewisse Lokalbanken. Das gilt auch für den Vertrag mit der Schweiz. Da die Fatca-Verpflichtungen gemäss dem Recht der USA für ausländische Finanzinstitute unabhängig von Staatsverträgen ab Anfang 2014 gelten, wollen die hiesigen Banken, dass der Vertrag mit den Erleichterungen ebenfalls auf jenes Datum in Kraft treten kann.”
Proposed Swiss FATCA law (draft):
Switzerland has developed a FATCA federal law. At the bottom of the proposed Swiss FATCA law is stated that the law is subject to a facultative referendum, which adds to my view that the Swiss consider the agreement to be a treaty and and the related law to be based on a treaty:
1 Dieses Gesetz untersteht dem fakultativen Referendum.
2 Der Bundesrat bestimmt das Inkrafttreten
I am not an attorney but based on the above and other articles available on the internet, it appears that the Swiss government is treating the FATCA Abkommen as a Treaty from their side.
banking with USA is more important than any other law in Switzerland. THe hell with the inhabitants.
Thank you, very helpful.
On the trilingual pages of the CH financial administration responsible for FATCA (here, Italian: http://www.sif.admin.ch/themen/00502/00807/index.html?lang=it ), they seem to use the term Vertrag (not Staatsvertrag, which is found in the media) in German, and l’accord and accordo (not traite’ and trattato) in French and Italian, respectively. Thus, officially, it seems they are using the equivalent of “agreement,” not “treaty.” (Unlike the British HMRC, which specifically calls it a “treaty”).
This is not dispositive, of course, since they may in fact be following treaty procedure.
Here is a follow-up email that I just sent to firstname.lastname@example.org who responded as discussed above to my original mail to email@example.com last Sunday. Sorry as I do not have the time at the moment to translate to English, you’ll have to Google it. I will publish any responses here when I receive them. As far as I am concerned, as my emails to SIF do not mention any particular cases involving particular individuals or entities, but ask only for general information, there is no reason that I cannot republish the responses here in exersize of freedom of press.
Also as to point 1 in my below follow-up email (which as of 16.03.2013 has gone unanswered), Allison Christians article “The Dubious Legal Pedigree of IGAs (and Why It Matters)” is very à propos to the questions that I raise and that also Jim Jatras raises below. I am copying the PDF to SIF by email today.
The Swiss Federal government has a comprehensive list of “Staatsverträge” in the three official languages. The FATCA Agreement is on the list, about 40% the way down:
“Agreement between Switzerland and the United States of America for Cooperation in Facilitate the Implementation of FATCA”
The Staatverträge on the list are called by various names in German: Vertrag (Contract), Staatsvertrag (Treaty), Abkommen (Agreement), Briefwechsel (Correspondence), Vereinbarung (Agreement), etc. The name used appears not to be important as to whether it is considered a Staatsvertrag (Treaty).
Although a layman, I am of the opinion that the Swiss government considers the FATCA Agreement a Treaty.
In 2009 the Swiss and the US governments agreed to make changes to the 1996 double tax agreement. Three comments:
1) The German “Abkommen” is used for the 1996 agreement (which is translated into English as “convention”) and was ratified by the US Senate.
2) The 2009 “Protocol amending the Convention” is awaiting US Senate ratification (blocked by Rand Paul).
3) “Abkommens” can be considered treaties by the US.
French title: Protocole modifiant la Convention du 2 octobre 1996 entre la Confédération suisse et les Etats-Unis d’Amérique en vue d’éviter les doubles impositions en matière d’impôts sur le revenu
German title: Protokoll zur Änderung des Abkommens zwischen der Schweizerischen Eidgenossenschaft und den Vereinigten Staaten von Amerika zur Vermeidung der Doppelbesteuerung auf dem Gebiet der Steuern vom Einkommen, unterzeichnet am 2. Oktober 1996 in Washington
English title: Protocol amending the Convention between the Swiss Confederation and the United States of America for the avoidance of double taxation with respect to taxes on income, signed at Washington on October 2, 1996
@Mark Twain as to “banking with USA is more important than any other law in Switzerland. The hell with the inhabitants”.
Yes indeed, I was really upset when I read that between the lines in SIF’s response. Who says all the other countries in the world have to bow to such an extortion / blackmail attempt as FATCA? If enough countries tell the US to go get lost, the US should be forced to back down. The Swiss government has to respect Article 2 of the Constitution which requires defense of the rights and interests of the people and the sovereignty of the nation, see my question to SIF in the original email:
“An acceptation of an extraterritorial foreign law such as FATCA is a clear violation of the constitutional mandate ‘The Swiss Confederation protects the liberty and the rights of the people and insures the independance and the security of the country.’ (Art 2 Line 1 Swiss Federal Constitution)”
Pingback: Swiss Parliament to Vote on FATCA IGA in Summer Parliamentary Session, Proposed Swiss Federal Law to Apply FATCA | Maple Sandbox
Pingback: Reblog from IBS: Response from Swiss State Secretariat for International Financial Matters, Swiss Parliamentary Vote on FATCA IGA to Take Place Next Summer, Proposed Swiss Federal Law to Apply FATCA | Stop Unconstitutional Double Taxation
Pingback: Reblog from IBS: Response from Swiss State Secretariat for International Financial Matters, Swiss Parliamentary Vote on FATCA IGA to Take Place Next Summer, Proposed Swiss Federal Law to Apply FATCA | Stop Unconstitutional Double Taxation
The whole thing looks hastily put together on the Swiss side. There seems to be some confusion about withholding tax:
L’établissement financier suisse rapporteur prélève l’impôt à la source prévu à l’art. 7, par. 2, de l’accord FATCA sur tous les revenus crédités sur le compte, conformément à la législation applicable aux Etats-Unis.
The reporting Swiss institution withholds the tax under Article 7.2 of FATCA on ALL income paid into the account, in line with applicable US legislation.
Does this mean US source income will be taxed on recalcitrant accounts, or ALL income? The Report that Jefferson has noted qualifies this as “US source income” but the whole business is very sloppy. I’m no legal eagle but there are as many holes in this as in a Swiss cheese plant, as one would expect when one country tries to enact their laws in another…
@lyoba Excellent observation!!! Please write firstname.lastname@example.org or one of the other contact addresses above to reinterate this question. This is a very scary point!!! I regret that I missed it in my last email to SIF.
However, hastily put together, I’m not sure. This has been brewing since at least last summer. Who knows, this may be a misreading of the FATCA law on the part of the Swiss.
“(8) The term “Foreign Reportable Amount” means, in accordance with relevant Treasury Regulations, a payment of fixed or determinable annual or periodical income that would be a withholdable payment if it were from sources within the United States.”.
But see proposed application law, Section 5, Art 15, Line 2 “2 L’établissement financier suisse rapporteur prélève l’impôt à la source prévu à l’art. 7, par. 2, de l’accord FATCA sur tous les revenus crédités sur le compte, conformément à la législation applicable aux Etats-Unis.” Reading Art 7 par 2 of the IGA “including by withholding tax where required by those U.S. Treasury Regulations”. So we are to refer back to the FATCA final regs, which I don’t believe expect any witholding on anything other than US source income.
Thanks for the clarification. Still, it would be good to make the point crystal clear in the Swiss legislation. But no wonder the SVP are against FATCA. Purely and simply, the US are moving in!
Here’s an interesting Russian view on FATCA in Switzerland:
Швейцарcкие банки: хроника отступления (Swiss banks: Chronicle of the retreat)
The Greens and SVP are rejecting FATCA in Switzerland:
SVP und Grüne sagen Nein
This link currently isn’t working:
How the banks put the federal council under pressure:
Also from today:
US laws are making it difficult for Americans to store gold abroad
@Swisspinoy NZZ article link appears to be working now. The SVP (=UDC in French) has always been against any threats to bank secrecy, but what I cannot understand is that Ueli Maurer is SVP and didn’t stop the FATCA IGA negotiations, maybe he tried, but we have seen the poor result. He is President this year and is Defense Secretary, but he appears to have forgotten to use his balls. Widmer-Schlumpf is Bourgeois Democratic Party (an offshoot of the SVP which was created following some sort of squable I think between Schlumpf and Blocher) and you already know what I think of her, let alone that equally stupid titless [maldiction] Calmy-Rey (socialist). In Switzerland we are suffering because of gutless wonders in the Federal Council. F* read the constitution and grow a pair of balls or tits, depending upon your gender…. MERDE!
Unsere Demokratie wird nicht von den Banken unter Druck gesetzt, sondern unsere Souveränität von den USA: die schreiben ein 500 Seiten starkes Gesetz, was Recht im Ausland zu sein hat. (Foreign Account Tax Compliance Act). Die Schweiz sollte unbeding ein “foreign chocolate producers compliance act” erlassen, und weltweit mittels Drohnen jeden erschiessen, der sich nicht daran hält.
It’s not our democracy that’s being threatened by the banks, but our sovereignty by the USA. They’ve written a 500 page law on what law should be in other countries. Switzerland must write the ” foreign chocolate producers act”and threaten to shoot anyone who doesn’t comply.
@AJ, good quote thanks.
For those that don’t understand the language of Goethe, here is a translation, I had to take some liberties as the structure of German is harder to translate to English than French, but here goes: “Our Democracy will not be pressured by banks, and our sovereignty neither by the USA. The USA writes a strong 500 page law, that is to be applied abroad. (FATCA). Switzerland absolutely should pass a “foreign chocolate producers compliance act”, and use drones worldwide to shoot those who do not comply.”
Funny! It really expresses the rediculousness of FATBARDT.