Taxation

• Pages: 30-31

Page 30

Thousands of wealthy U.S. taxpayers are suspected of maintaining assets in Switzerland to evade U.S. taxation. The following decision of the Swiss Bundesverwaltungsgericht (Federal Administrative Tribunal) (Tribunal), is the first case where a U.S. taxpayer challenges the disclosure of Swiss bank account information to U.S. authorities.

In sum, the Tribunal concludes that the 2009 Agreement between the U.S. and Switzerland to disclose certain Swiss bank account information to U.S. authorities is a "general understanding" that cannot change or modify the countries' Double Taxation Convention (DTC). Swiss authorities can provide assistance to U.S. authorities only if DTC covers the alleged underlying offense According to the DTC, the Swiss government can provide assistance only in matters of tax fraud and the like. Such an offense requires affirmative action. Mere inaction, such as failure to file a W-9 form in the U.S., is not enough.

The W-9 "Request for Taxpayer Identification Number and Certification" is used for U.S. taxpayers to notify entities such as banks of their Social Security Number or Taxpayer Identification Number, so that the bank, in turn, can notify U.S. tax authorities. Here, U.S. authorities claimed that the Plaintiff failed to file such a W-9 form. Such inaction alone is not fraudulent. Thus, Swiss authorities cannot provide assistance in this matter.

This case arose out of two agreements concluded on August 19, 2009:

[1] To settle a lawsuit by the U.S. against UBS Bank (U.S. v. UBS AG, 09-cv-20423, S. D. Fla.), UBS agreed to provide data on 4,450 accounts held by U.S. taxpayers to the Swiss Federal Tax Administration (SFTA). To receive the account data, the U, S. Internal Revenue Service (IRS) was to submit a Treaty Request pursuant to Article 26 of the DTC.

[2] At the same time, Switzerland and the U.S. entered into the "Agreement Between the United States of America and the Swiss Confederation on the request for information from the Internal Revenue Service of the United States of America regarding UBS AG, a corporation established under the laws of the Swiss Confederation."

This Agreement provides for information exchange regarding the 4,540 UBS bank accounts, to enforce U.S. tax compliance while at the same time respecting Swiss sovereignty. The Agreement has an Annex with "Criteria for Granting Assistance Pursuant to the Treaty Request" which essentially requires that the IRS demonstrate a reasonable...