The Federal Tax Administration (FTA) of Switzerland announced on June 27, 2024, the signing of a reciprocal FATCA Model 1 Intergovernmental Agreement (IGA) with the United States. This agreement marks a significant shift in how Switzerland will handle the automatic exchange of tax information with the U.S.
Previously, FATCA was implemented in Switzerland under the Model 2 IGA. Under this model, Swiss financial institutions were required to directly disclose account details to the U.S. Internal Revenue Service (IRS), but only with the consent of the relevant U.S. clients. If consent was not granted, the U.S. had to request this data through regular administrative assistance channels.
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The newly signed Model 1 IGA changes this process. Now, the tax authorities of both countries will mutually and automatically exchange account data. Swiss financial institutions will report the required data to the FTA, which will then transmit it to the IRS. Conversely, the IRS will also provide the FTA with account data of Swiss taxpayers.
Switzerland had previously signaled its intention to switch to the Model 1 IGA. In October 2014, the Federal Council approved a mandate to negotiate this change with the United States. These negotiations were successfully concluded on November 13, 2023.
The implementation of this new agreement in Switzerland will require changes to national law, which will be decided by the Federal Assembly. The transition to the Model 1 IGA is expected to take effect on January 1, 2027.
This shift aims to enhance tax transparency and cooperation between Switzerland and the United States, aligning Switzerland’s practices with global standards for the automatic exchange of financial information.