Swiss Federal Council Proposes Enhanced Due Diligence Procedures

The Swiss Federal Council issued a press release on 5 June 2015 (Link) calling for enhanced due diligence requirements in order to prevent the inflow of untaxed assets. These requirements should apply with regard to clients resident in countries where the future agreements on the Automatic Exchange of Financial Account Information do not apply. They will not apply in relation to clients resident in countries that have signed a Multilateral competent authority agreement (MCAA) with Switzerland. US clients are also included as FATCA is considered to effectively have an MCAA. These due diligence requirements are not applicable to clients who are resident in Switzerland for tax purposes.

For all other clients, a risk-based assessment should be conducted by financial intermediaries when accepting assets in order to effectively determine whether these assets have been duly taxed. The supervisory authorities and the recognized self-regulatory organization will determine in due time the details of the risk-based assessment. In brief, in cases where a risk-based assessment leads to the assumption that the offered assets are untaxed, the financial intermediaries should reject the business relationship if it is a new client. For preexisting clients, if the client offers untaxed assets, this creates the suspicion that the preexisting assets are also untaxed. The financial intermediary shall request proof of tax compliance or regularization of the situation. If none of this takes place in the allocated timeframe the business relations with this client shall be ended unless the proof of tax compliance is impossible to obtain or regularizing the situation is liable to create “unreasonable adverse effects”.

Seven more countries join CRS by signing the Multilateral Competent Authority Agreement

On 4 June 2015, seven more countries joined the multilateral agreement implementing the standard on automatic exchange of tax information (Link). Australia, Canada, Chile, Costa Rica, India, Indonesia and New Zealand are the latest countries to join the Multilateral competent authority agreement (Link), raising the total number of signatory countries to 61 (Link).

IRS grants extension of time to file FATCA reporting for 2014

Under FATCA certain US withholding agents, foreign financial institutions, and non-financial foreign entities, are required to file Form 8966 (Link), FATCA Report, using the International Data Exchange Service (IDES) provided by the IRS. The original due date for filing the 2014 Form 8966 was 31 March 2015. For calendar year 2014 reporting only: The IRS provided an automatic 90-day extension of time to file Form 8966 to all filers extending the deadline until 29 June 2015.  Filers can now request a second automatic 90-day extension by completing the Request for Additional Extension of Time to File Form 8966 for Tax Year 2014 (Link). If a filer is unable to electronically file Form 8966 as a result of an undue hardship, a request to file Form 8966 on paper can be made by submitting the template Request for Waiver from Filing Form 8966 Electronically for Tax Year 2014. Both requests can be mailed together (Link).

Link to PwC Tax Insights

Italy ratifies FATCA law

The Italian law ratifying the Intergovernmental Agreement between Italy and the United States of America aimed at improving international tax compliance and implementing FATCA has been approved on 3 June 2015 by the Italian Parliament (Link-Italian). It will enter into force after its publication in the Italian Official Journal (date not yet provided).

BVI Extension on FATCA Registration and Reporting

The International Tax Authority of the Ministry of Finance, Government of the Virgin Islands, announced on 1 June 2015 the extension of FATCA deadlines for the United Kingdom and United States of America for BVI Financial Institutions with regard to their enrollment and reporting obligations (Link). The deadline to register or enroll with the BVI Tax Authority via the BVI Financial Account Reporting System (BVIFARS) has been extended to 30 June 2015 while the deadline to file reports has been extended to 31 July 2015. According to the press release, this relaxed approach only applies for 2015 in order to allow BVI Financial Institutions to “ensure that they complete their customer due diligence and comply with the Agreements”.  Further, BVI financial institutions wishing to offer the Alternative Reporting Regime to their clients now have until 30 September to submit an election to the International Tax Authority.

Reminder! IDES Testing Session Opened 1 June

IDES opens for testing from Monday, 1 June 2015 at 12:00 EDT (UTC/GMT-4) to Monday, 8 June 2015 at 12:00 EDT.  The test session will be open to users that have completed IDES enrollment (Link) by Thursday, 28 May 2015 at 5:00 PM EDT. Note:  Use test data only. The test files should not contain any production data or personally identifiable information, such as a valid taxpayer number, account number, or social security number. Any production files submitted to the test environment will not be processed.  Do not submit production files to the test environment or test files to the production environment.

New from the IRS! Approved Organization (non-SSL) Digital Certificate

The IRS has recently announced that the Internal Data Exchange Service (IDES) now accepts the IdenTrust™ FATCA Organization Certificate (Link). IdenTrust developed a new digital certificate product specifically designed as a non-SSL organization certificate. You have the option to select from the two IRS-approved IdenTrust products:

  • Organization (non-SSL) Certificate
  • TrustID SSL Certificate

For more information regarding this, the IRS provides additional information on digital certificates the IDES Resources page (Link).

Luxembourg FATCA reporting deadline extended to 31 July 2015

On 29 May 2015, based on a formal request from the Luxembourg Bankers’ Association (ABBL), the Administration des Contributions Directes in Luxembourg has granted an extension to the deadline for FATCA reporting for 2015 from 30 June to 31 July 2015.  This is expected to represent an extraordinary extension with the deadline for subsequent years remaining 30 June.

Agreement between Switzerland and EU for automatic exchange of information in tax matters: signing and consultation period

On 27 May 2015, the agreement between Switzerland (Link – Switzerland) and the EU (Link – European Union) for Automatic Exchange of Information (“AEoI”) in tax matters was signed in Brussels.  Switzerland and the 28 EU member states intend to collect financial account data starting in 2017 and exchange it from 2018 once the necessary legal basis has been created.   The agreement was signed by Swiss State Secretary Jacques de Watteville, Finance Minister Jānis Reirs from Latvia, representing the EU Presidency, and EU Commissioner Pierre Moscovici. The agreement on the AEoI in tax matters will apply for all 28 EU member states. The OECD’s global AEoI standard has been included in full in the new agreement.

The agreement signed is a protocol of amendment to replace the taxation of savings agreement between Switzerland and the EU that has been in force since 2005, but it includes the existing withholding tax exemption for cross-border payments of dividends, interest and royalties between related entities.  It is interesting to note that the Federal Council’s press release notes that given that various EU member states have launched or enhanced tax regularisation programmes recently, “the regularisation of the past with neighbouring countries and the main EU member states can be considered settled to a large extent”.

In addition, the Federal Council has also initiated the start of a consultation period regarding the EU AEoI agreement.  Interested parties and the cantons have until 17 September 2015 to comment on the AEoI agreement with the EU. Thereafter, the Federal Council will submit the agreement to Parliament for approval.  Parallel to this, work is continuing on the legal basis for the automatic exchange of information with foreign countries. The Federal Council will adopt the dispatches on the AEoI Act, the Multilateral Competent Authority Agreement and the OECD/Council of Europe administrative assistance convention for the attention of Parliament in the weeks ahead.

Finally, the European Commission is currently concluding negotiations for similar agreements with Andorra, Liechtenstein, Monaco and San Marino, which are expected to be signed before the end of 2015.

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