Switzerland has long been considered to be an international tax haven due to low tax levels and privacy laws, but this European nation may be losing its place in the spotlight to the United States. After years of threatening Swiss banks accused of helping Americans hide their money, the U.S. is now in the awkward position of providing similar services for the rest of the world.
CRS is FATCA on Steroids
The Foreign Account Tax Compliance Act (FATCA) is a financial disclosure and transparency law affecting U.S. taxpayers who hold foreign accounts. It provides U.S. tax authorities with an independent source of information about offshore assets held by U.S. individuals and legal entities.
The Common Standard for Automatic Exchange of Financial Account Information in Tax Matters (CRS) is a global standard created by the Organization for Economic Cooperation and Development (OECD), at the request of the G8 and the G20. CRS uses a different definition of a reporting financial institution, has no minimum reporting limits, and has a substantially broader scope than FATCA. CRS is essentially FATCA on steroids.
The CRS reporting standards do not include the U.S. because the U.S. uses its own FATCA reporting rules. Switzerland, however, is part of the OECD and thus subject to CRS. When CRS was implemented, wealthy individuals began moving their assets from Swiss banks to the United States in search of less restrictive tax and privacy laws.
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For wealthy Mexican or Latin American investors, moving assets to the United States is often more appealing than being subject to the CRS reporting guidelines in Switzerland and other OECD member countries. However, FATCA obligations can still trigger problematic privacy and safety issues if investments are not structured carefully.
If you have questions about how FATCA or CRS reporting obligations could be affecting your tax liability and putting your privacy at risk, we encourage you to request a complimentary copy of our essential guide, Is It a Matter of FATCA or CRS? What Every Investor With Foreign Accounts Needs to Know. Then contact us to schedule a consultation to discuss how MEG International Counsel can help you best protect your assets, save money on taxes, and plan for the future.