ADMINISTRATIVE ASSISTANCE IN TAX MATTERS –
FOCUS ON UBS
PRAGER DREIFUSS AG is a leading, over 30-lawyer strong, business law firm with an international focus that has offices in Zurich,
Berne and Brussels.
HOW CAN THE PROCEDURE REGARDING THE DISCLOSURE
OF ACCOUNT INFORMATION IN THE UBS MATTER BE
Based on a treaty between Switzerland and the US for
the Avoidance of Double Taxation in 1996 and a further
agreement reached in 2009, the IRS submitted a
request for administrative assistance to the Swiss
Federal Tax Administration (SFTA) in August 2009.
Following this request the SFTA ordered UBS to submit
all information about accounts as defined in the annex
to the 2009 agreement to the SFTA. Although the
criteria were described as detailed as possible, UBS had
to assess each account on a case-by-case basis.
Following the identification of an account, UBS was
obliged to inform the account holder and also the
beneficial owner of the account. Some account holders
were informed before the data was transferred to the
SFTA, others many weeks after the transfer. Account
holders affected by the procedure were given the
option to submit their arguments to the SFTA before its
decision about the disclosure. Following receipt of the
SFTA’s order, account holders and beneficial owners
had 30 days to lodge an appeal with the Swiss Federal
Administrative Court, the highest authority in
Switzerland for matters of administrative assistance. In
these cases the Swiss Federal Administrative Court’s
judgment can only be reviewed by the European Court
of Human Rights. The latter is, however, not competent
to prohibit Switzerland from disclosing information to
the US authorities. Switzerland can nevertheless be
reprimanded for its behavior.
BASED ON WHAT CRITERIA DID UBS IDENTIFY THE
ACCOUNTS THAT WOULD HAVE TO BE DISCLOSED TO SWISS
FEDERAL TAX ADMINISTRATION?
The request did not include any names of account
holders and/or beneficial owners but rather set forth
typical patterns and account set-ups that were being
investigated. Therefore, UBS had to check its files as to
whether the required pattern was fulfilled.
According to the requirements set out in the
agreement of 2009 the SFTA requested UBS to
disclose the details of such bank accounts that either
belonged directly to US persons or were held by an
offshore structure that in turn was beneficially
owned by a US person. Furthermore, the agreement
required that a reasonable suspicion for the
commission of a tax offence by the US person was
established. Finally, the assets and the revenue in the
case in question had to exceed a certain limit (assets of
CHF 250 000 upward in case of fraud and yearly
revenues of at least CHF 100 000 for at least three
years in case of continued serious tax offenses) as
defined by the agreement between Switzerland and
WHO WAS REGARDED AS A US-PERSON?
US-domiciled clients of UBS were included irrespective
of their citizenship. In addition, the term US person also
included US citizens or green card holders without
regard for their place of residence.
HOW WAS THE IDENTIFICATION OF US PERSONS
PROCESSED BY UBS?
The bank relied on written information in the files and
avoided contacting the responsible client relationship
manager. The crucial data (US residency or US