Swiss bank already provide detailed information to the U.S. authorities under the terms of the Fatca tax law. Now, the U.S. is extending the demands on foreign banking institutes – much to the disquiet of the finance industry.
Fatca, the U.S. tax law applicable to Swiss banks since mid-2014, has been a double blow for Switzerland. Swiss companies have to provide details about their U.S. clients according to a complex procedure. And Switzerland is working with version 1.0 of the agreement, meaning that it foregoes receiving data from the U.S.
But the U.S. taxman isn't satisfied yet. According to article 871(m) of the income tax law, foreign banks are required to deduct the tax at source for derivates of U.S. equities for their domestic clients. The double-taxation treaty already provides for a deduction of 15 percent on dividends of U.S. equities for Swiss investors.
Swiss Banks – Deputy Sheriffs and Tax Collectors
The trigger for the law was a trick to save taxes used by offshore funds. The new rule will come into force in 2017.
Switzerland's «NZZ» newspaper, widely read by the business community and political elite of the country, called the fact that Swiss banks not only are called upon to act as deputy sheriffs but now also are required to collect taxes for the U.S. impertinent. The U.S. regulatory zeal had caused anger and incertitude among Swiss bankers, the paper added.
With a Little Help From the G5
But at least Swiss banking, which had to pay some 5 billion francs in fines to the U.S. following the tax dispute, now can hope for assistance from other countries. The G5 states of Germany, Italy, France, the U.K. and Spain have lodged their disquiet about the planned law in Washington.
