Switzerland is a country of only about 8 million people. But its centuries-old tradition of providing confidential financial services to clients from around the world has made it a major center for foreign bank accounts.
That historic tradition is increasingly yielding, however, to a U.S.-led effort to detect tax evasion on offshore accounts. In 2010, Congress passed The Foreign Account Tax Compliance Act (FATCA), which is intended to make foreign financial constitutions provide an unprecedented amount of information to U.S. authorities about the foreign accounts of U.S. taxpayers.
In order for FATCA to fully go into effect, though, it is necessary for the U.S. to negotiate an intergovernmental agreement (IGA) with each foreign government that it will apply to. The IGA sets forth the process for identifying accounts owned by U.S. taxpayers and providing required information to appropriate authorities.
The effort by the U.S. Treasury Department to negotiate these agreements is ongoing. But the U.S. has already succeeding in signing one with a key country: Switzerland. Given the Swiss tradition of bank secrecy, the very existence of such an agreement shows how much the game has changed on the taxation of foreign accounts.
The acting U.S. treasury secretary announced the agreement with Switzerland last month. Treasury officials are hoping that similar bilateral agreements with many other countries will follow.
For U.S. taxpayers with offshore accounts, this is one more reminder of the new, more transparent regime that is taking shape in many parts of the world. And in that regime, the threat of tax evasion charges is more real than ever before.
Our firm handles situations similar to those discussed in this post in Miami and throughout South Florida. To learn more about our practice, please visit our page on offshore accounts.