Foreign Account Tax Compliance Act (FATCA) 

The Foreign Account Tax Compliance Act (FATCA) is a unilateral US tax law aimed at enforcing the country’s right to tax its citizens anywhere in the world. 

FATCA is directed at financial institutions around the globe and requires them to provide the US tax authorities annually with information regarding all accounts held by US taxpayers. Pressure to comply comes in the form of a 30% withholding tax penalty on all income earned from US securities. The administrative workload involved in applying FATCA is very high for financial institutions. 

FATCA Agreement 

Along with many other countries, Switzerland has concluded an intergovernmental agreement with the US to facilitate the implementation of FATCA: the FATCA Agreement. This agreement forms the basis of the Swiss FATCA Act, which entered into force in 2014.  

The FATCA Agreement currently in force is based on what is known as Model 2, under which Swiss financial institutions provide the US tax authority, the Internal Revenue Service (IRS), directly with the information that is subject to reporting with the consent of the customers concerned. Where a customer does not give consent, an anonymised, aggregated report containing certain information is provided. The IRS can use this aggregated report to seek disclosure of specific customer and account information, for example by means of a request for administrative assistance, if this is provided for under the double taxation agreement between Switzerland and the US. 

Change in model targeted 

The international operating conditions for banks have changed dramatically since the FATCA Agreement was negotiated. In particular, the fact that over 100 states have now committed to automatic exchange of information (AEOI) makes Model 2 appear outdated. With this in mind, the Federal Council approved a mandate for negotiations with the US on changing to a reciprocal FATCA Agreement under Model 1.  

One result of this change would be that certain account information would flow in both directions, i.e. not just from Switzerland to the US, but also from the US to Switzerland. This would create increased legal certainty for Swiss banks because reports under Model 1 would be submitted to the Federal Tax Administration (FTA) rather than directly to the IRS as they are now. In addition, other duties that place a heavy burden on the banks, such as regular FATCA certification, would no longer apply. On balance, the changeover to Model 1 could be expected to cut costs for the banks, particularly as regards the duplications with AEOI.  

The negotiations over a change in model were initiated years ago but have yet to be concluded. The SBA is working to ensure that, as far as possible, the change does not create any extra expense for the banks. 

FATCA Qualification Committee 

The FATCA Qualification Committee was formed to institutionalise dialogue between the tax authorities and the financial sector with regard to the joint implementation of FATCA. It assesses questions on interpretation that arise in connection with applying the FATCA Agreement and standardises how the Agreement is put into practice. Since neither Switzerland nor the banks are free to interpret the FATCA Agreement as they see fit, the relevant US authorities are consulted in cases of doubt. 

The FATCA Qualification Committee is led by the State Secretariat for International Finance (SIF). Various authorities and industry organisations, including the SBA, are also involved.   


Andreas Rohrer
Policy Advisor Tax & Economic Policy
+41 58 330 62 62