Switzerland: Doing FATCA group requests right

International Tax Review is part of Legal Benchmarking Limited, 1-2 Paris Garden, London, SE1 8ND

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Switzerland: Doing FATCA group requests right

Sponsored by

Sponsored_Firms_deloitte.png
li-switzerland-as254270160.jpg

Brandi Caruso and Robin King of Deloitte investigate the lessons learned and pitfalls to avoid in responding to FATCA group requests under the Swiss-US double tax treaty.

With the 2009 protocol to the Swiss-US double tax treaty ratified, the US tax authority (Internal Revenue Service – IRS) can now submit group requests under the US Foreign Account Tax Compliance Act (FATCA). Swiss financial institutions (FIs) should therefore anticipate receiving, at any time, production orders from the Swiss Federal Tax Administration (SFTA).

All affected Swiss FIs should prepare themselves to be able to respond to orders within the 10-day deadline stipulated by the inter-governmental agreement (IGA) and Swiss FATCA Law. However, there are several areas where unexpected issues can arise in this regard and where workload can be underestimated.

One key area is the scope and FATCA classification of pool-reported accounts, which may need to be re-assessed because of three factors. One is the initial decision by some Swiss FIs to not apply thresholds, which is now mandated by the recently published SFTA FAQs. Second is the absence or insufficiency of the pool-reporting audit trail, for example which accounts were reported in which pool and for what reason. Third are uncertainties related to the application of presumption rules for entity accounts, which lead to the default classification as non-participating foreign financial institutions (NPFFIs – financial institutions that are not compliant with FATCA).

Another is repeating US indicia search efforts, especially where the audit trail of indicia triggering pool-reporting is not sufficiently robust. Swiss FIs must identify the strongest US indicium that led to the pool-reporting as well as a document showing the indicium – alternatively, all relevant US indicia may be reported. If a Swiss FI decides to report all relevant US indicia, extra work may be required for the indicia, from the 'US bank programme', which are not also FATCA indicia. Some indicia are not evidenced by any document (for example, when the Swiss FI was informed via phone), which requires explanatory comments or supporting screenshots from IT systems.

The FATCA-XML generation may also require additional work that could include IT development and/or data extractions. In particular, we see complexities in retrieving details about relevant income, gross proceeds and redemptions for non-consenting US accounts, as the pool-reporting only required reporting of the aggregate account balances.

A final consideration is that data unavailability/inaccuracy may impact the workload and timing. This could be because the data required is extensive, for example where it includes the personal details and (non-)US status of persons behind entities. Ensuring the right level of reliability needed for the data to be produced may also require cross-checking structured data against client documentation. When required information is not available in structured format, or not reliable, or when the supporting documentation is missing, the workload will also increase.

Underestimating the workload

There are three big areas where the workload involved in responding to requests can also be easily underestimated. The first is SEI-XML generation, which requires data that is often not readily available and must be retrieved and pre-processed.

This is a very work-intensive process. Mapping all the persons associated with the accounts to the roles used in the reporting (for example, the FATCA account holder, FATCA substantial owner, contracting party, beneficial owner/beneficiary, controlling person, etc.) is no trivial exercise.

Furthermore, data extractions are burdensome because some data is complex to retrieve, namely numbered accounts, and extracted data requires significant data cleansing/pre-processing work. When information is not available as structured data, or when the data is not reliable, populating the SEI-XML becomes fully manual, which may lead to inconsistencies, delays, and human error risk. Finally, certain data elements will not be stored in the CRM systems (for example, what due diligence procedures and definitions were applied), and these would require input from a FATCA expert.

The second area is that PDF documentation preparation is often more significant and slower than expected. Unless robust metadata allow identifying relevant documents automatically, manual reviews of large sets of documents are likely required. Some data items are also complex to document. Also, if a Swiss FI decides to redact personal information of employees and/or unrelated third parties, the associated workload may be significant.

The third is the existence of inconsistencies between prior data productions, in particular to US authorities for example under the Swiss bank programme, and to answer to FATCA group requests which should be avoided; this is not only true for the accounts in scope, but also the associated roles, US indicia, and account classification.

Be prepared

While reasonably straightforward in principle, the SFTA FATCA group requests technical specifications and the recently published FAQs require an adequate implementation. Some extra work is often required, in unexpected areas – as often, the devil lies in the details.

A full understanding of the requirements, adequate assessments, and preparation is required to be able to answer such requests within 10 days and to avoid a last-minute peak of workload with risks of incorrect reporting.

Deloitte
T: +41 58 279 6397
E: bcaruso@deloitte.ch
W: www.deloitte.ch

more across site & shared bottom lb ros

More from across our site

MAP cases keep increasing, and cases closed aren’t keeping pace with the number started, the OECD’s Sriram Govind also told an ITR summit
Nobody likes paperwork or paying money, but the assertion that legal accreditation doesn’t offer value to firms and clients alike is false
Ryan hopes the buyout will help it expand into Asia and the Middle East; in other news, three German finance ministers have called for a suspension of pillar two
SKAT, which was represented by Pinsent Masons, had accused Sanjay Shah and other defendants of fraudulent dividend tax refund claims
TP managers must be able to explain technical issues in simple terms, ITR’s European Transfer Pricing Forum heard
Prudential had challenged HMRC over VAT group relief; in other news, Donald Trump unveiled timber and wood tariffs, and the European Commission published a ViDA implementation strategy
Australia’s CbCR rules have ‘widespread support’ and do not put American companies at a competitive disadvantage, the FACT Coalition said
Baker McKenzie advised two of the member firms involved, while several advisers provided transaction counsel to US-based Grant Thornton Advisors
Foreign remittance requirements put additional administrative burden on Indian law firms and strain their relationship with foreign associate firms, according to practitioners
She will formally take over the leadership of the private client firm in July next year, succeeding the veteran Margaret Robertson
Gift this article