CRS / FATCA Reporting

The legal framework in Switzerland

Switzerland has adopted two automatic exchange of information regimes in tax matters that apply directly to professional trustees:

• FATCA (Foreign Account Tax Compliance Act): In force since 2014 under the intergovernmental agreement (IGA) concluded between Switzerland and the United States. FATCA requires Swiss financial institutions, including trustees, to report accounts held by US persons (US citizens, permanent residents, green card holders).
• CRS (Common Reporting Standard): In force since 2017 under the Federal Act on the International Automatic Exchange of Information in Tax Matters (AEOIA) and the Multilateral Competent Authority Agreement (MCAA). Switzerland exchanges information with over 100 partner jurisdictions.

Classification of trusts under the CRS

The CRS treatment of a trust depends on its classification as a financial entity or a non-financial entity. In practice, most trusts administered by a Swiss professional trustee are classified as investment entities managed by a financial institution (the trustee), making them reporting financial institutions.

The consequences of this classification are significant:

• The trust itself is a reporting financial institution required to identify and report reportable persons
• The "controlling persons" of the trust include the settlor, the trustee, the protector, named beneficiaries and any other person exercising ultimate effective control over the trust
• The reporting covers the identity of these persons, their jurisdiction of tax residence, and the value of the trust and income attributed to them

Reportable persons

For a trust administered from Switzerland, the following persons are potentially reportable under the CRS:

• The settlor: Always reported as a controlling person, regardless of the nature of the trust (revocable or irrevocable)
• Beneficiaries: Named beneficiaries in the trust deed are reported. For discretionary trusts with an open class of beneficiaries, only beneficiaries who have actually received a distribution during the year are reported
• The protector: Reported as a controlling person if their powers confer effective control over the trust
• Any other person: Exercising ultimate effective control over the trust (for example, an investment adviser with extensive powers)

Reporting procedure

The CRS/FATCA reporting process follows a strict annual calendar:

• Information collection: The trustee obtains a tax self-certification form from each reportable person, including their jurisdiction of tax residence and tax identification number (TIN)
• Status determination: The trustee determines the status of each person (resident in a partner jurisdiction or not) and verifies the plausibility of the information provided
• Report preparation: The trustee prepares the annual declaration in XML format in accordance with the schemas defined by the Federal Tax Administration (FTA)
• Transmission to the FTA: The declaration is transmitted to the FTA before 30 June each year for the reporting period of the previous calendar year
• Exchange by the FTA: The FTA transmits the information to the tax authorities of the relevant partner jurisdictions, which do the same in return

FATCA-specific obligations

FATCA imposes additional specific obligations when the trust has links to the United States:

• Identification of any US person among the settlors, beneficiaries and other controlling persons
• Annual reporting to the FTA of accounts held by US persons (Form 8966)
• Obtaining a Global Intermediary Identification Number (GIIN) if the trust is classified as a participating foreign financial institution (Participating FFI)
• Application of the 30% FATCA withholding on certain US-source payments if the trust is not compliant

For trusts with beneficiaries or assets in the United States, FATCA compliance is a critical issue requiring particular attention and often the involvement of a tax adviser specialising in US taxation.

Consequences of non-compliance

Non-compliance with CRS/FATCA obligations exposes the trustee and the trust to severe consequences:

• Administrative sanctions from the FTA of up to CHF 250,000
• Criminal sanctions in the case of intentional violation (fines or even imprisonment)
• Reputational risk and potential jeopardisation of the FINMA licence
• For FATCA: 30% withholding on US-source payments