According to the QI, Swiss financial institutions are required to collect a tax from their US customers and pass it on to the US authorities without disclosing their customers` data. The main purpose of the agreement is to tax unreported income from U.S. sources. The introduction of FATCA was heavily influenced by the inability of IQ to effectively combat tax evasion outside the United States. Under FATCA, Swiss financial institutions are required to identify and document all their customers and proactively communicate certain account information via “US accounts”, i.e. automatically to the US tax authorities (IRS). According to the current Model 2, Swiss financial institutions report eligible account data directly to the IRS with the consent of the customers concerned. Without consent, certain account information is reported and aggregated anonymously. Based on this aggregated report, the IRS may request the transmission of specific customer and account data through a normal request for assistance to the U.S. DBA.
In addition, a mandatory arbitration clause will be introduced in order to avoid double taxation in the absence of an agreement in the cartel procedure. On January 1, 2017, U.S. regulations under Section 871(m) came into effect. The 871(m) scheme aims to regulate derivative instruments such as futures, forwards, full return swaps, stock lending and repo transactions by referring to US equities, regardless of where the issuer is located. Non-U.S. banks holding U.S. securities on behalf of their underlying customers act as intermediaries. The QI program allows certain non-U.S. intermediaries to enter into a contractual agreement with the U.S. INTERNAL Revenue Service (IRS) and assume tax obligations normally reserved for U.S. financial institutions. The IQ agreement imposes on the QIs the following main obligations: each IQ is required to designate a person responsible for compliance with the IQ agreement.
This person is appointed “QI Responsible Officer” (RO) and must implement a compliance program that includes policies, procedures, processes and controls. Every three years, the OR is required to certify IQ compliance with the IRS. To assist ROs in obtaining this certification, an independent examiner is required to conduct a periodic review covering one of the three years of the certification period, unless the IQ is entitled to make a declaration of waiver. Learn more about periodic qi verification and certification requirements. In addition to the agreement on the Amending Protocol, it was agreed at the time to start further negotiations with a view to a general revision of the DTA. In this way, improvements such as reducing the withholding tax on dividends from qualified investments to 0% (zero rate) should be achieved. . .
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