What Is FATCA?
The Foreign Account Tax Compliance Act (FATCA), enacted by the US Congress in 2010 and effective from 2014, requires foreign financial institutions (FFIs) — including Swiss banks, fiduciaries, and asset managers — to report account information on US persons to the IRS, either directly or through a local tax authority under an Intergovernmental Agreement (IGA).
The Swiss-US IGA (Model 2)
Switzerland and the US signed a Model 2 IGA in 2013. Under Model 2, Swiss FFIs report directly to the IRS (not via ESTV), subject to Swiss bank secrecy and applicable treaties. In practice, Swiss banks obtain customer consent for FATCA reporting; refusal triggers account closure or restriction.
Who Counts as a "US Person"?
- US citizens (including dual Swiss-US citizens)
- US green card holders (lawful permanent residents)
- Individuals meeting the Substantial Presence Test (183 days in current year on weighted basis)
- US corporations, US partnerships, US trusts and US estates
FBAR: Report of Foreign Bank and Financial Accounts
Separate from FATCA, US persons with Swiss accounts exceeding USD 10,000 aggregate at any time during the calendar year must file FinCEN Form 114 (FBAR) electronically. FBAR penalties for wilful non-compliance can reach the greater of USD 100,000 or 50% of the account balance per violation.
Form 8938 (FATCA Reporting by Individuals)
US persons with specified foreign financial assets above certain thresholds must also file Form 8938 with their US federal tax return. Thresholds vary by filing status and residency (higher thresholds apply for US persons living abroad).
Qualified Intermediary (QI) Agreements
Many Swiss banks and custodians enter into Qualified Intermediary agreements with the IRS. Under QI, the Swiss institution assumes responsibility for withholding US tax on US-source income paid to US and non-US account holders. For Swiss account holders receiving US dividends or interest, the QI withholding regime determines how much is withheld at source.
Practical Considerations for Swiss-US Dual Citizens
- Both countries assert full taxing rights on worldwide income — the US-Switzerland DTA provides mechanisms to avoid double taxation, primarily through the Foreign Tax Credit (Form 1116)
- Swiss AHV contributions paid by self-employed individuals are creditable against US self-employment tax under the US-Switzerland Totalization Agreement
- Consider the Branch Profits Tax implications for US citizens owning Swiss partnerships or sole proprietorships
- Swiss pillar 3a pension accounts: IRS classification is unsettled — some advisors treat them as foreign grantor trusts requiring Form 3520/3520-A
Source basis: FATCA IGA CH-US 2013 · FinCEN FBAR regulations · IRS Publication 54 (Tax Guide for US Citizens Abroad) · ESTV DTA documentation.