FATCA and Switzerland

205 thoughts on “FATCA and Switzerland”

1. @osgood, well I wouldn’t say it’s intensified. The closing of accounts and sectioning off of Americans has been going on for some years. I myself was moved to the American section once UBS realised I was a dual national and that was back in 2011.

   As far as going back to the 90s, that sounds a bit extreme to me and certainly not required under the Swiss IGA. Still, they’re running so scared they may decide to do more digging once they’ve done the years required under the IGA which are 2008 onwards.

2. @Joe Blow:
   USPs in Switzerland have certainly been on the front line of IRS/ DOJ actions. This has probably translated into some Americans having hard feelings towards the local American government institutions. I’ve heard these comments in the past six months: Someone said something like (expletives deleted): “If the embassy is burning, don’t call me to join the bucket brigade.” Another wondered whether the local embassy received “spy tips” from Americans any longer.
   The ambassador rides in a bullet proof SUV, which is apparently a change from several years ago when normal cars were used (or were they bullet proof cars). If this is indeed a change, it could be due to a heightened sense of risk but I wonder whether it has more to do with Benghazi than anything. (Top Swiss government officials use standard cars and often drive themselves.)

3. USCs in Switzerland are on the front-line of the DOJ and IRS’ terror campaigns against Americans worldwide. Here are several issues reported recently on a message board:
   1) Construction loan: American reports that he cannot find a bank in Switzerland that will grant a construction loan, prior to obtaining a mortgage when the house is complete. He can obtain a mortgage.
   2) Exit tax: An American reports that his tax accountant advised him to divorce so as to divide the assets before renouncing. He stated he has a good pension from a former employer but has an average income.
   3) Supplemental income: A low-income USC receives a pension and Swiss governmental supplemental income (evidently due to old age or disability). The income is below the minimum income in Switzerland for filing a tax return but above the US threshold. He has not been filing US tax returns and requested advice.

4. Poster over on the English Forum has been advised by his bank, Valiant AG, to enter the Streamlined program. Evidently they asked for copies of his tax filings, their auditors found some errors and won’t accept his amended returns.

   “Since I failed to report interest earned on my bank account with my previous returns they’re recommended I participate in the recently announced Streamlined Foreign Offshore Procedure.

   The bank refused to acknowledge my amended returns, claiming that they might be rejected by the IRS and threatening to report my account as non-compliant on the 15th of September deadline.

   Since I was rather tired of filling out forms and responding to numerous phone calls and emails, I finally gave in and agreed to have their lawyer enter me in the Streamlined Program. A professional accountant has been hired to amend my tax returns for the last three years (for the second time) and the bill should come to around $3,500.

   My bank is Valiant AG, and they requested I submit copies of my income tax returns from the period 2008 – 2013 as well as my FBARs over the same period. Apparently, these documents were audited by their FATCA committee lawyers and the error noted.”

   http://www.englishforum.ch/finance-banking-taxation/200706-postfinace-demands-past-fbars-10.html

   So the banks really have become the IRS’s lapdogs here in Switzerland.

5. Mentions FATCA;

   http://townhall.com/columnists/ronpaul/2014/09/16/will-the-swiss-vote-to-get-their-gold-back-n1891949/page/full

   ‘Will The Swiss Vote to Get Their Gold Back?’
   Ron Paul | Sep 16, 2014

6. Ex-Miss Schweiz Lauriane Gilliéron möchte Amerikanerin werden, berichtet Blick.ch. Gilliéron, die sich derzeit mit einem Service-Job über Wasser hält, ist seit zwei Jahren mit einem Piloten zusammen. Für ihn möchte sie nun eine Doppelbürgerschaft beantragen. Den Schweizer Pass will sie dabei auf keinen Fall verlieren.

7. http://www.rts.ch/info/economie/6208018-le-prepose-a-la-protection-des-donnees-au-secours-des-clients-postfinance.html

   I thought that the forgoing would be interesting. PostFinance wants to use the data of anybody who has an account with them and uses their internet banking services.

   The Swiss federal privacy ombudsman says stop.

   Why didn’t the Federal Administration resist FATBARDT as to violations of data protection ???

8. @Jefferson D Thomas, different scernario. PF was saying if you don’t sign up to the advertising you can’t use online payment service. Ombusman quite rightly said no way. Consumers must have the choice whether they want the advertising or not, but it shouldn’t impact on other services.

   FATCA was debated and discussed in Parliament and approved to get around said protection. It was that or leave the banks open to more US action against them.

   Plus PF can’t slap a 30% withholding tax on you for not signing up to the advertising, while the IRS can if you’re wilfully non-compliant.

9. … Für die Schweiz am bedeutendsten sei Tamara Ashford, die neue Chefin der Steuerabteilung, die auch das Model-NPA unterschrieben hat. Ashford ist nominiert für einen Sitz am US-Steuergerichtshof und wartet auf die Zustimmung des Senats. Im Wahljahr kann sie sich möglicherweise in keinem Dossier eine moderate Linie erlauben. Schweizer Banken werden sich wohl länger als gehofft mit dem US-Programm beschäftigen müssen.

   http://www.nzz.ch/wirtschaft/usa-fordern-totale-kooperation-1.18401683

10. In the event that anyone is unaware of this, please note that each contributor is asked to post under one alias only. When we see that someone is using more than one identity, we normally email and ask that only one be chosen, otherwise, we will not be able to post the comments. In some cases, email addresses are obviously not valid. In this event, comments will be placed in pending until such time that the person contacts one of the admins here indicating which alias he/she wishes to use.
    Tricia
    nobledreamer16@gmail.com

11. Following is an analysis of Swiss governmental population statistics. A purpose of this analysis is to calculate the “actual number” of USCs in Switzerland vs. the official statistics by using “born in USA” statistics as an estimate of the number of USCs resident in Switzerland:
    1) Estimated number of US citizens in Switzerland at year-end 2013, permanent residents only:
    a. Born in US: 35,925
    b. Born in Switzerland with US citizenship (calculated): 1,281 (N. Americans: 1,727 x 74.2% Americans)
    c. Born outside of US*, acquired from US citizen parent: unknown, no estimate made
    d. Expatriations: 3,000 to 4,000, say, 3,500
    e. Calculation: a + b + c – d = e; approx. 33,706 **
    *except Switzerland

    2) US citizens eligible for expatriation, i.e., second citizenship recommended before expatriation:
    a. Born in US with CH citizenship: 16,689
    b. Born in US with other non-US citizenship: 3,771
    c. Calculation 1: a + b = c; approx. 20,460 (includes already expatriated)
    d. Calculation 2: a + b – 3,500 = d; approx. 16,960 (excludes already expatriated)

    3) Number of “Born in US with other non-US citizenship”:
    2010: 3,025
    2011: 3,027
    2012: 3,581
    2013: 3,771
    Comment: USCs are taking out or using their other non-US citizenship at an increasing rate. Most of these are EU citizenships based on an additional analysis (not presented).

    4) Number of “Born in US with CH citizenship”:
    2010: 15,627
    2011: 16,005
    2012: 16,227
    2013: 16,689

    5) Number of “Born in US” permanent residents in Switzerland:
    2010: 33,718
    2011: 34,906
    2012: 35,402
    2013: 35,925

    6) Acquisition of CH Citizenship by US citizens:
    2010: not available
    2011: 283
    2012: 335
    2013: 360
    Note: A Swiss law change, effective in 2015, reduces number of years of residence required for naturalization from 12 to 10 years. This should result in, at least, a moderate spike in naturalizations in 2016/ 2017.

    Concluding remarks:
    1) Switzerland is a small country of 8 million population with a relatively small number of US citizens.
    2) The fact that Switzerland is in the top 3 for expatriations, along with Canada and the UK (per WSJ), shows the impact that the US government’s concerted terror campaign is having on Switzerland-resident USCs.
    3) An estimated 6.0% of eligible USCs, resident in Switzerland, can be expected to expatriate in 2014 (1,000 / 16,960).

    ** – The 33,706 is higher than the official figure of 19,784 USCs permanently resident for 2013. This is primarily due to dual citizens being reported as Swiss or with other non-resident citizenships for government registration purposes. (Parenthetically, there was a down-tick in the official number of USCs from 19,914 (2012) to 19,784 (2013), which might be related to USC expatriations, increasing Swiss naturalization of USCs and use of other non-US and non-Swiss citizenships by USCs for purposes of government registration).

12. As I see it, the IRS began its full-court press on USCs abroad as a pilot project in Switzerland in 2012. Since then their pilot project has been causing around 6% of USCs in Switzerland, who have a second-citizenship, to expatriate each year there, based on my calculations in the post above.

    In Switzerland a calculated 50.3% of American citizens, who are permanent residents, have a second citizenship. Using this percentage figure, this would suggest that 3,823,000 of the 7,600,000 Americans abroad worldwide (DOS, May 2013) could in theory expatriate. Using the 6.0% expatriation rate for Switzerland would suggest that 229,000 Americans abroad would give up their US citizenship per year when FATCA is fully rolled out and banks worldwide are checking and perfecting US citizenship. This is a rate of around 1,100 per working day and, if it were to come to pass, it is unlikely that the US embassies and DOS in Washington DC could not handle the processing with current staffing and methods.

    Comments:
    1) The average percentage of second citizenship for Americans abroad, who are permanent residents in their host country, is probably higher than the 50.3% calculated percentage for Switzerland.
    – For example, if 75% of Americans permanently abroad have a second citizenship than this would equal 5,700,000 who could potentially expatriate. 6% of 5,700,000 would mean that 342,000 would expatriate each year.
    2) It could be expected that banks in many countries other than Switzerland will be less rigorous in checking the US citizenship of their customers. Since fewer USCs would be identified as a result, the rate of annual rate expatriations should be lower than what has been seen in Switzerland.
    – Halving the worldwide rate to 3% and using a potential population of 3,823,000, this would mean 115,000 expatriations per year.
    – Holding the rate at 3% but using 5,700,000 as the potential population would mean 171,000 expatriations per year.

13. http://www.rts.ch/video/emissions/infrarouge/6259252-la-suisse-a-la-solde-des-juges-etrangers.html

14. A message board poster in Switzerland commented on notarizing a POA at the U.S. Embassy in Bern today. S/he then mentioned this at the bottom of the post:

    “Of note: during the 30 minutes – I witnessed 3 people renounce their US citizenship.”

    It’s message 27 in this thread
    http://www.englishforum.ch/daily-life/57561-there-notary-public-house-zh-2.html

15. Hi,
    I have a friend who just came to the US from Switzerland. He wants to know the tax angle. I explained FinCen114 etc and PFIC. He doesn’t know what he owns at the moment. What are mutual funds called in that country so I know some of the ‘danger’ words? For example ICVC or OEIC in the UK spell danger.
    Does the Swiss tax treaty just protect pensions? What kind of accounts might have that are problematic (trusts for example)?
    I know the angle from the UK perspective real well. I want to get him up to speed so that when he talks to a professional he will be able to understand if the guy is rubbish and if not get something out of the interaction.
    He will likely file 1040NR this year.

16. The U.S.-Swiss Tax Programme requires that banks in Switzerland self-certify whether they are in one of three categories (the DOJ can also determine a fourth category). This poorly developed programme, which does not distinguish between banks that passively accepted accounts with USPs and banks that actively solicited accounts from USPs, was sponsored by Kathryn Keneally, Asst Attorney General, Tax. In June she left the DOJ and resurfaced as a tax partner at the New York office of DLA Piper, one of the world’s largest law firms.

    An article in the Tages-Anzeiger notes the high cost of this programme. It initially was calculated that the programme costs would be 75% for fines and 25% for legal costs. It now appears that it will be 75% for legal costs and 25% for fines:

    http://www.tagesanzeiger.ch/wirtschaft/unternehmen-und-konjunktur/USAnwaelte-fressen-den-halben-Jahresgewinn-weg/story/21195817

    It has been reported that New York law firms are handling most of this work.

    Not to cast dispersions, but did Kathryn Keneally design up this programme to maximize income for U.S. law firms and ensure her own future marketability and income?

17. “Not to cast dispersions, but did Kathryn Keneally design up this programme to maximize income for U.S. law firms and ensure her own future marketability and income?”

    Bingo! The ultimate in legalised corruption.

18. US citizen naturalization statistics from the small Swiss half-canton of Basel-Stadt (Basel-City), pop. 196,000, show an approx. 50% increase in rate of naturalizations from 2004 to 2013.

    Naturalizations by US citizens:
    2004: 6 per 1,000 (eye-balled from final chart in attached article)
    2013: 9.0 per 1,000

    The naturalization rate is the 4th highest after citizens from ex-Yugoslavia (25.9 per 1,000), Turkey (23.2 per 1,000) and Germany (9.4 per 1,000). It might be noted that Germany only began to allow dual-citizenship for its citizens who took out Swiss citizenship several years ago, which might explain the the comparably high rate for German citizens.

    http://www.statistik-bs.ch/thema/gesellschaft/einbuergerungen

19. Further to the above, below are calculated naturalization rates Switzerland-wide for three of the four countries above plus the UK for 2013 vs. 2011:

    2013:
    1) Turkey: 22.3 naturalizations per 1,000 Turkish citizens residing in Switzerland
    2) US: 18.1 naturalizations per 1,000 US citizens residing in Switzerland
    3) Germany: 13.4 naturalizations per 1,000 German citizens residing in Switzerland
    4) UK: 8.1 naturalizations per 1,000 UK citizens residing in Switzerland

    2011:
    1) Turkey: 25.8 naturalizations per 1,000 Turkish citizens residing in Switzerland
    2) US: 15.0 naturalizations per 1,000 US citizens residing in Switzerland
    3) Germany: 13.4 naturalizations per 1,000 German citizens residing in Switzerland
    4) UK: 9.1 naturalizations per 1,000 UK citizens residing in Switzerland

    Note:
    1) Naturalization rate for ex-Yugoslavia was not calculated due to difficulties in managing data.
    2) Statistik Schweiz data used for naturalizations (numerator)
    3) Eurostat data used for number of citizens residing in Switzerland (denominator)

    Comments:
    The naturalization rate for US citizens increased from 15.0 per 1,000 to 18.1 per 1,000 from 2011 to 2013, or 20.7%. In addition to the increase, the 18.1 rate per 1,000 is comparable to the high rate for Turkish citizens. Throw in the calculated 6.0% expatriation rate for US citizens for 2014 and we begin to see the impact that the US-Swiss Tax Programme and FATCA is having on US citizens residing in Switzerland. Those that can are acquiring Swiss citizenship and expatriating.

20. “Those that can are acquiring Swiss citizenship and expatriating.”

    Some expats are even renouncing and going stateless. What does that tell you about the value of US citizenship?

    http://glr.com/cln

21. Barclay’s drops out of ‘OVDP’ for banks in Switzerland:

    http://taxconnections.com/taxblog/confirmation-that-barclays-private-bank-in-switzerland-has-dropped-out-of-a-u-s-program/#.VHyjQog76rU

22. @Samuel Adams:
    ” “Not to cast dispersions, but did Kathryn Keneally design this programme to maximize income for U.S. law firms and ensure her own future marketability and income?”

    Bingo! The ultimate in legalised corruption. ”

    Kathryn Keneally, the former Asst Attorney General, Tax, joined DLA Piper’s New York office as a partner several months ago. According to a 2013 FT article, “DLA Piper takes top spot in law firm rankings”, DLA Piper is the largest law firm in the world where its partners earn an average of $1.3 million annually:

    “DLA Piper has become the biggest law firm in the world by revenue, knocking its rival Baker & McKenzie off the top spot, according to new rankings.

    The two firms swapped the first and second positions in annual global rankings compiled by Legal Business magazine after DLA, which historically has operated with a US arm distinct from the rest of the world, increased its revenue 9 per cent to $2.4bn. Its average profit per equity partner, or PEP, a keenly observed metric of financial health, increased 6 per cent to $1.3m.”

    Of possible interest to Kathryn Keneally, DLA Piper LLP is a member of DLA Global, which is organized as a Swiss Verein.

    Do I smell an odor?

23. The US Embassy in Bern reportedly sent an email inviting USCs in Switzerland to visit a Zurich location where they can meet privately with IRS agents in February. In the event that the IRS has not done its homework, it should note that Switzerland has a strict law on foreign agents operating on Swiss territory, Swiss Criminal Code Art. 271:

    “Art. 271
    Unlawful activities on behalf of a foreign state
    1. Any person who carries out activities on behalf of a foreign state on Swiss territory without lawful authority, where such activities are the responsibility of a public authority or public official,
    – any person who carries out such activities for a foreign party or organisation,
    – any person who encourages such activities,
    is liable to a custodial sentence not exceeding three years or to a monetary penalty, or in serious cases to a custodial sentence of not less than one year.”

    http://www.admin.ch/ch/e/rs/311_0/a271.html

    In a nutshell, IRS agents and those responsible for organizing these sessions could be arrested unless prior legal approval has been obtained.

24. No need to wait for the email to reach your inbox.

    Details published here: http://bern.usembassy.gov/federal_tax_law.html

    Doodle has ca. 20 persons registered so far.

    Maybe worth a separate IBS posting?

25. @Orwell;
    Love the announcement;
    ‘The U.S. Internal Revenue Service (IRS) is Coming to Switzerland’

    “The U.S. Embassy is pleased to announce a visit and presentation by the Internal Revenue Service (IRS). ….”

    And, so ironic that in light of FATCA they say;
    “…Please note that the IRS will NOT be able to answer questions regarding banking matters….”