FATCA U.S. Persons and their Swiss Accounts

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Ezra Underwood
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1 Zurich, April 20, 2011 FATCA U.S. Persons and their Swiss Accounts Dr. Peter R. Altenburger ALTENBURGER LTD legal + tax

2 Agenda Cross-Border Eol OECD MC UBS Files FATCA Dodd-Frank Act 2

3 Cross-Border Eol 3

4 Cross-Border EoI Different Systems Form of Exchange Bank Customer System On request Named Art. 26 OECD, TIEA On request Unnamed UBS accounts Automatic Named FATCA Automatic Unnamed Italian Scudo 4

5 OECD MC 5

6 OECD MC (1) Art. 26, 2009 OECD-MC (2009 Protocol amending Art. 26 U.S. - Swiss Treaty) EoI on Request Requesting Country must have a reasonable suspicion Information must be foreseeably relevant (no fishing expeditions) Implementing domestic legislation (in the requested countries) Due process: the foreign taxpayer must have the possibility to file an appeal before information is being released to the requesting country 6

7 OECD Global Forum (2) OECD Global Forum 2010 OECD has launched the Peer Review Process Phase 1 will examine legal and regulatory framework Phase 2 will examine implementation of the standards in practice Schedule: Switzerland, phase 1, 2nd half 2010; phase 2, 2nd half 2012 Liechtenstein, phase 1, 2nd half 2010; phase 2, 2nd half 2012 Austria, phase 1, 1st half 2011; phase 2, 2nd half

8 OECD MC (3) Peer Review: Swiss Treaties do not meet Art. 26 OECD Standards OECD-Standard (Art. 5 para. 5 (a) OECD TIEA-MC): the identity of the person under examination or investigation. OECD-Standard (Art. 5 para. 5 (e) OECD TIEA-MC: to the extent known, the name and the address of any person believed to be in possession of the requested information Swiss standard (except for 2009 protocol with the U.S.): name and address of the person under examination or investigation Swiss standard (except for the U.S. and France): name and address of the person believed to be in possession of the requested information 8

9 4 450 UBS Files 9

10 4 450 UBS Files (1) Administrative Court A-6053/2010, 10 January, 2011 U.S. Persons to include U.S. citizen (irrrespecitve of their residence) and resident aliens Offshore Company Accounts (7.2.1) entities which are able to operate a Swiss bank account, including corporate bodies, Stiftungen and trusts Beneficial Owners (7.3.2, 8.2) substance over form approach he, who has the power to dispose over the assets of the bank account ( wirtschaftliche Verfügungsmacht ) U.S. beneficiary of a FL-Stiftung is the economic owner and is therefore obliged to declare these assets in the U.S. 10

11 4 450 UBS Files (2) Administrative Court A-7013/2010, 18 March 2011 Irrevocable and Discretionary Trusts (6.1) distinction between legal and equitable ownership Beneficiaries (6.3.2) have mere expectations ( Anwartschaften ) but no claims ( kein Vollrecht ) Non-distributed trust assets no reporting obligations for U.S. persons who are beneficiaries of a irrevocable and discretionary trust! 11

12 FATCA 12

13 FATCA (1) FATCA Automatic EoI, incorporates an Extraterritorial Unilateralism There is 30% U.S. tax on all withholdable payments made to a FFI that has not entered into a FATCA-Agreement with the IRS Enters into force on January 1,

14 FATCA (2) FATCA Foreign Irrevocable and Discretionary Trusts FATCA Comment Letter submitted by ABA, February 14, 2011 a strong argument can be made that a wholly discretionary beneficiary has no interest at all in the trust income or corpus until an actual distribution occurs (14/21) 14

15 Dodd-Frank Act (H.R. 4173) 15

16 Dodd-Frank Act (H.R. 4173) (1) Subdivide Swiss Banking Activity for U.S. persons into: Advisory Brockerage Custody 16

17 Dodd-Frank Act (H.R. 4173) (2) Advisory (1/2) Chapter IV, Sec. 402 Restricts the Definition of Foreign Private Advisers (Sec. 202 a Investment Advisors Act of 1940) Exempted from Registration is an Investment Adviser who has no place of business in the U.S. has fewer than 15 clients in the U.S. has aggregate assets under management of less than USD 25 million 17

18 Dodd-Frank Act (H.R. 4173) (3) Advisory (2/2) Registration deadline for those who do not qualify under the private adviser s exemption: On or before July 21,

19 Dodd-Frank Act (H.R. 4173) (4) Brokerage An SEC registered investment adviser may either be his own SEC registered broker-dealer or relay on others, who in turn are SEC registered broker- dealers 19

20 Dodd-Frank Act (H.R. 4173) (5) Custodian Activities No U.S. regulations 20

21 Dodd-Frank Act (H.R. 4173) (6) Four Different Categories of Swiss FFI: The majority of Swiss FFI will be fully-fatca compliant, however, not be accepting any U.S. persons A few Swiss FFI will not be FATCA compliant but refrain from acquiring any U.S. securities Very few Swiss FFI s will be fully FATCA and Dodd/Frank compliant and will thus be allowed to accept U.S. Persons ( W-9 ) A few Swiss FFI s may be tempted not to be FATCA compliant, not to be transacting any U.S. securities and to shelter (non compliant) U.S. persons Quo vadis U.S. persons as beneficiaries of irrevocable discretionary trusts? 21

22 Thank you for your attention! Zurich Seestrasse 39 CH Küsnacht Tel zurich@altenburger.ch Geneva Rue Rodolphe-Toepffer 11bis CH Geneva Tel geneva@altenburger.ch

Requests presented without a specific investigation purpose in the hope for the tax authorities to receive useful information.

Requests presented without a specific investigation purpose in the hope for the tax authorities to receive useful information. We master many terrains January 2013 Protocol amending the double taxation Agreement between the Swiss Confederation and the Russian Federation with respect to taxes on income and capital: entry into force