Registration with both the IRS and the Swiss FTA

With the entry in force of the new Model 1 IGA, Reporting Swiss FIs will have to re-register with the Internal Revenue Service (IRS) as “Reporting Model 1 FIs”. A specific process is planned to facilitate this task and let Reporting Swiss FIs keep their current Global Intermediary Identification Number (GIIN). In particular, to ensure their inclusion on the IRS FFI List for the month following the date of entry into force of the new Model 1 IGA, they will need to resubmit their registration on the FATCA IRS Portal within 20 days.

Reporting Swiss FIs will also have to register with the Swiss Federal Tax Administration (FTA), as the FTA will become the FATCA competent authority going forward. Should a Reporting Swiss FI have no reportable accounts, it will still need to register in order to submit a nil report, a new requirement from the Swiss FTA that was not required by the IRS.
 

Communication with counterparties

Reporting Swiss FIs that are now Reporting Model 1 FIs due to the change of IGA Model must also inform their counterparties of their change in FATCA status within 90 days following the entry into force of the new Model 1 IGA. Reporting Swiss FIs can provide their counterparties with an updated FATCA self-certification (including the relevant applicable IRS Form W-8) or simply communicate the change via e-mail.
 

FFI Agreement

The FFI Agreement only applies to Participating FFIs and Reporting Model 2 FFIs. The FFI Agreement in force for an existing Reporting Swiss FI will automatically expire on the day before the entry into force of the new Model 1 IGA without the need to undertake any procedure.
 

Periodic and final certifications of compliance

With the expiration of the FFI Agreement these certifications will no longer be required. The United States and Switzerland agreed on special measures for the outstanding certifications of compliance or final certification of compliance due for the period ending with the expiration of the FFI Agreement. A Reporting Swiss FI will not be required to submit any certifications to the IRS but will need to keep them in its records for a six-year period and provide them to the IRS upon request. Alternatively, the Reporting Swiss FI can choose to submit the certification electronically on the FATCA portal and, in this case, the aforementioned retention period rules do not apply.
 

Due diligence requirements

Reporting Swiss FIs will need to comply with the due diligence requirements set out in the new IGA’s Annex I. These requirements remain essentially unchanged from Annex I of the current Model 2 IGA with two exceptions, which are shown below. Accounts for which the due diligence procedure has already been conducted and completed by the Reporting Swiss FI do not need to be reinspected unless the FI believes the self-certification or documentation associated with the account is unreliable or incorrect.

• Exception 1: Consenting and non-consenting US accounts
  Since the distinction between consenting and non-consenting US accounts does not exist under the Model1 IGA, a “consent to report” will no longer need to be collected for US accounts.
  
  These accounts will all be considered as US reportable accounts subject to nominative reporting with, in principle, the inclusion of the US TIN of each specified US person account holder and, in the case of a non-US entity with one or more specified US persons who are controlling persons, the US TIN of each US controlling person.
  
  If not available, only for pre-existing US reportable accounts (accounts opened before 30 June 2014), Reporting Swiss FIs will be allowed - for calendar year 2027- not to include the US TIN in the FATCA reporting. This relief only applies if Reporting Swiss FIs comply with the requirements set out in Notice 2024-78, which, among other things, includes the obligation to reach out to the account holders to request the missing US TINs.
  
  
• Exception 2: Recalcitrant account holders
  The concept of a recalcitrant account does not exist under the new Model 1 IGA. Accordingly, accounts which qualified as recalcitrant accounts, in the absence of the exchange of the requested information between the Swiss FTA and the IRS within eight months of the receipt of a group request, will be considered US reportable accounts subject to nominative reporting as indicated under Exception 1 above. For reporting periods starting with the entry into force of the new Model 1 IGA these accounts will no longer be subject to FATCA withholding provided all requested information (including the US TIN, absent relief granted under Notice 2024-78) is exchanged.
   

Client notification

Reporting Swiss FIs will need to notify reportable Specified US Persons directly or via the respective contracting party no later than 31 January of the year when the first exchange of information takes place.
 

Reporting of information collected according to the new Model 1 IGA

With respect to reporting periods as of the entry into force of the new Model 1 IGA, Reporting Swiss FIs will no longer submit the FATCA reporting directly to the IRS. Instead, Reporting Swiss FIs will have to submit the FATCA reporting to the Swiss FTA by 30 June annually. The Swiss FTA will then transmit this information to the IRS by 30 September. The aggregated reporting concerning non-consenting accounts will no longer exist, as all US reportable accounts will be reported separately on a nominative basis.

In principle, since the new Model 1 IGA should enter into force 1 January 2027, the first exchange of information according to the new Model 1 IGA should be submitted by Reporting Swiss FIs to the Swiss FTA with respect to calendar year 2027 by 30 June 2028.
 

Late-filed reports of information collected according to the Model 2 IGA

For reporting periods prior to the entry in force of the new Model 1 IGA, late-filed reports (i.e. reports of information collected according to the Model 2 IGA and submitted after 31 December of the year in which the new Model 1 IGA enters into force) are subject to special transitional procedures. In practice, late-filed reports should refer to reports filed for calendar years up to and including 2026 and submitted after 31 December 2027.

Late-filed reports will no longer be transmitted by the Reporting Swiss FI directly to the IRS given that this operational channel will no longer be available. Instead, Reporting Swiss FIs will transmit their late reports to the Swiss FTA. The latter will provide these reports to the IRS on a monthly basis.
For these late-filed reports, Reporting Swiss FIs will be allowed to replace non-consenting US accounts’ aggregate reporting with nominative reporting of each of these accounts as if they were US accounts that are not non-consenting (i.e. including account specific information as well as US TIN). The choice of this option would allow a FATCA group request to be avoided.

The Swiss FTA will publish specific technical guidance notes for late-filed reports.
 

FATCA group requests

Another side-effect of the change in model is the elimination of FATCA group requests for information on so-called non-consenting US accounts reported on an aggregate basis absent a consent to report. As all identified US reportable accounts will be subject to nominative reporting without the need for a consent to report under the new Model 1 IGA, the need for group requests drops.

Accordingly, the two countries agreed that group requests will end on 31 December of the year the new Model 1 IGA enters into force, i.e. in principle by 31 December 2027.
 

Self-certification and change in circumstances

According to the new Model 1 IGA FATCA Act, not only will Reporting Swiss FIs need to detect any client change in circumstances, but clients too have the duty to inform the FI within 30 days in case of changes in circumstances affecting the validity of a provided FATCA self-certification.

Moreover, according to the new Model 1 IGA FATCA Act, clients who intentionally omit to provide, or provide a Reporting Swiss FIs with an incorrect FATCA self-certification, are subject to a penalty of up to CHF 10,000. The same penalty applies if the client does not inform or incorrectly informs the Reporting Swiss FI of a change in circumstances.

We therefore recommend that Reporting Swiss FIs draw clients’ attention to the above-mentioned obligations and penalties regarding FATCA self-certification.