Swiss to process 4,450 American UBS client accounts
UBS: New Treaty Request Instead Of Unilateral Action
Bern, 19.08.2009 - Agreement between Switzerland and the USA enters into force In the UBS case, the United States will submit a new treaty request to Switzerland and will withdraw the John Doe summons that demands disclosure of the identity of 52,000 UBS account-holders. In return, Switzerland has undertaken to process the new treaty request, concerning approx. 4,450 accounts, within a year. These are the terms of the agreement between Switzerland and the USA to settle the looming conflict between the two nations' legal systems.
The agreement was signed today in Washington and entered into force immediately. It states that the United States will refrain from unilateral information-gathering measures that infringe Switzerland's sovereignty and rule of law. In particular, the USA will immediately withdraw the enforcement action relating to the John Doe summons against UBS that remains pending before the competent court in Miami. It also undertakes not to seek any further enforcement of the summons. The civil case in the US will remain pending for the time being to prevent any future claims expiring under tax law. It will nonetheless be finally and completely withdrawn in stages no later than 370 days from the date the agreement was signed.
Framework For Action Determined
The US tax authority, the Internal Revenue Service (IRS), will submit a new treaty request to the Swiss Federal Tax Administration (SFTA) on the basis of the tax treaty currently in effect between the two nations. The new request will draw on certain criteria in a framework for action that allows cases of "tax fraud and the like" to be identified in the case of UBS within the confines of applicable Swiss law and judicial practice. Some 4,450 accounts fall within this framework. The precise criteria are laid down in an annex to the agreement. At the request of the United States, the annex will not be published until 90 days after the agreement has entered into force to ensure the IRS voluntary disclosure program runs smoothly.
Serious Tax Offences Also Covered By Treaty Request
According to the tax treaty currently in place, the term "tax fraud or the like" is not restricted to conventional forms of fraud involving falsified documents or schemes of lies. Information may also be obtained with regard to serious tax offenses, specifically the continued evasion of large sums of tax. Under applicable law and the latest practice of the Swiss Federal Administrative Court, in dealings with the USA account information may also be released - through treaty request channels - even if the IRS does not yet know the name of the bank client concerned when it submits its request.
Project To Ensure Faster Handling
The SFTA will set up a project infrastructure to accelerate handling of the new treaty request. The project will involve around 30 specialists from an audit firm and some 40 lawyers and tax specialists recruited from within the federal government. These lawyers and experts bear sole responsibility for key sovereignty-related tasks, specifically the rendering of final decisions.
Under the terms of the agreement, the SFTA must issue final decisions on the first 500 cases within 90 days of the request being received. It has 360 days in total to make a final decision on whether the requested information may be issued in each of the 4,450 cases. UBS must make the account information covered by the treaty request available and prepare it for processing by the SFTA. This is the subject of a separate agreement between UBS and the IRS. The privacy of all of the persons concerned remains protected under the law, and they may contest the SFTA's final decisions before the Federal Administrative Court.
In an effort to build trust, the agreement provides for joint quarterly meetings to assess progress and identify and resolve any emerging problems at an early stage. Either party may also request further consultations on the implementation, interpretation or application of the agreement at any time. In addition, immediate consultations on appropriate measures may be requested if it appears that one of the parties is unable to fulfill an obligation on time or at all. If the actual results of the program fall significantly short of its targets after 370 days, both parties may take proportionate rebalancing measures to restore an equitable distribution of rights and obligations under the agreement. The United States government might, for example, delay the final withdrawal of its John Doe summons.