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Switzerland reporting and foreign trust rules

Switzerland has automatic exchange of information and FATCA arrangements, along with Swiss trustee rules. IRS reporting frameworks that a U.S. citizen may encounter as an owner or beneficiary of a foreign trust are also summarized here.

Swiss automatic exchange of information

Switzerland's automatic exchange of information framework calls for certain financial institutions to gather account details for clients who are tax resident abroad. The covered institutions named by the Federal Tax Administration are banks, collective investment vehicles and insurance companies. Information includes investment income and account balances.[3]

The institutions transmit information to the Federal Tax Administration through its ePortal. The FTA then sends it to the foreign tax authority responsible for the client. The State Secretariat for International Finance is responsible for coordination and strategic management, while the FTA is responsible for AEOI administration.[3]

The FTA describes AEOI as the OECD global standard for international automatic exchange of tax information, and says Switzerland committed to adopting it. The Swiss legal basis took effect before data collection began, with the first exchange following afterward.[3]

FATCA agreement status

The U.S. Treasury lists Switzerland's Model 2 intergovernmental agreement as in force and its Model 1 agreement as signed. Treasury also lists related agreements and understandings associated with the two models.[4]

Treasury describes FATCA as requiring foreign financial institutions to report information to the IRS about accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers have a substantial ownership interest. It says institutions may comply through FATCA regulations or through intergovernmental agreements treated as in effect in their jurisdictions.[4]

Trustee regulation and register information

FINMA says a trustee acting commercially must hold a FINMA licence. FINMA defines trustees as entities managing or holding a separate fund for beneficiaries or for a purpose set out in a trust instrument. It gives several tests for commercial activity, including gross earnings above CHF 50,000 in a calendar year, relationships with more than 20 contractual partners, or trust funds above CHF 5 million at any time.[1]

For a licence, FINMA lists requirements that include legal classification and commercial register registration, adequate risk management and internal controls, sufficient equity capital or securities, and affiliation with a supervisory organization. The listed registration is for the trustee's business form.[1]

U.S. reporting for foreign trust owners and beneficiaries

For U.S. reporting purposes, the IRS identifies a U.S. person as including a U.S. citizen. It says information reporting can apply when a U.S. person transacts with a foreign trust, is treated as its owner under grantor trust rules, or receives a distribution. The IRS lists Forms 3520 and 3520-A, Form 8938, and FinCEN Form 114, known as FBAR, among the relevant reporting frameworks.[6]

Forms 3520 and 3520-A

The IRS says Form 3520 generally applies to a U.S. person who creates or transfers property to a foreign trust, receives a distribution or certain trust loans or use of property, or is treated as the trust's U.S. owner. Form 3520 instructions specify that an owner reports ownership in Part II, even if there were no trust transactions during the year. A U.S. person receiving a distribution generally reports it in Part III.[6][7]

A foreign trust with a U.S. owner under grantor trust rules is to file Form 3520-A and provide annual statements to its U.S. owners and beneficiaries. If the trust does not file, the U.S. owner is to complete a substitute Form 3520-A and attach it to the owner's timely Form 3520. The IRS instructions set the regular Form 3520-A due date at the 15th day of the third month after the foreign trust's tax year ends; a substitute attached to Form 3520 is due with Form 3520. When that day falls on a weekend or legal holiday, the due date moves to the next business day.[6][7]

Forms 8938 and FBAR

Form 8938 may apply when the total value of specified foreign financial assets in which a U.S. person has an interest exceeds applicable reporting thresholds. The IRS separately says that a financial interest in, or signature authority over, a foreign financial account may bring an annual FBAR filing requirement. Its examples include a bank account, brokerage account, mutual fund, trust, or another type of foreign financial account.[6]

These are distinct U.S. reporting provisions. The IRS states that an exception from Forms 3520 and 3520-A does not itself affect a person's Form 8938 or FBAR obligations. Whether any listed form applies depends on conditions including ownership status, trust activity, account interest or authority, and applicable asset thresholds.[6]

Questions and answers

What information does Switzerland exchange under AEOI?

The Swiss FTA says certain banks, collective investment vehicles and insurance companies collect investment income and account balance information for clients who are tax resident abroad. The FTA forwards transmitted data to the relevant foreign tax authority.[3]

What FATCA agreement status does Treasury list for Switzerland?

Treasury lists Switzerland's Model 2 agreement as in force and its Model 1 agreement as signed.

Does Switzerland have a beneficial ownership or trust register?

Certain trustee business forms are entered in the commercial register, and FINMA licenses commercial trustees.[1]

When does the IRS say Form 3520 relates to a foreign trust?

The IRS says Form 3520 generally applies to certain transfers or loans involving a foreign trust, distributions or certain use of trust property, and ownership under grantor trust rules. Its instructions say a U.S. owner completes Part II even if the trust had no transactions during the year.[6][7]

Who files Form 3520-A when a foreign trust has a U.S. owner?

The IRS says the foreign trust is to file Form 3520-A and provide annual statements to U.S. owners and beneficiaries. If it does not file, the U.S. owner completes a substitute form and attaches it to the owner's timely Form 3520.[6]

When might Form 8938 or FBAR apply?

Form 8938 may apply if a U.S. person has an interest in specified foreign financial assets whose total value exceeds the relevant thresholds. FBAR may apply when the person has a financial interest in or signature authority over a foreign financial account.[6]

Related glossary terms

  • Section 6048: Section 6048 sets information reporting rules for certain foreign trusts. Its parts cover notice of events, U.S. owner duties and beneficiary distributions.
  • U.S. owner of a foreign trust: The Form 3520 instructions define a U.S. owner as a person treated as owning trust assets under grantor trust rules. Ownership can apply to part of a trust.
  • Section 679: Section 679 addresses certain transfers by U.S. persons to foreign trusts. It treats some property transfers as ownership when the trust has a U.S. beneficiary.

Related articles and guides

Tools and official documents

  • FATCA agreement lookup: Look up any jurisdiction in the U.S. Treasury FATCA table and see its agreement model and status as the Treasury lists them, with a link to the source.
Sources and data notes
  1. Swiss Financial Market Supervisory Authority (FINMA), Trustees. https://www.finma.ch/en/authorisation/portfolio-managers-and-trustees/trustees/. Retrieved .
  2. Federal Tax Administration (FTA), Questions and answers of the AEOI Qualification Committee. https://www.estv.admin.ch/de/fragen-antworten-zum-aia-qualifikationsgremium. Retrieved .
  3. Federal Tax Administration FTA, Automatic exchange of information AEOI. https://www.estv.admin.ch/en/automatic-exchange-of-information-aeoi. Retrieved .
  4. U.S. Department of the Treasury, Foreign Account Tax Compliance Act: agreements and understandings by jurisdiction. https://home.treasury.gov/policy-issues/tax-policy/foreign-account-tax-compliance-act. Retrieved .
  5. Internal Revenue Service, United States income tax treaties, A to Z. https://www.irs.gov/businesses/international-businesses/united-states-income-tax-treaties-a-to-z. Retrieved .
  6. Internal Revenue Service, Foreign trust reporting requirements and tax consequences. https://www.irs.gov/businesses/international-businesses/foreign-trust-reporting-requirements-and-tax-consequences. Retrieved .
  7. Internal Revenue Service, Instructions for Form 3520. https://www.irs.gov/instructions/i3520. Retrieved .

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