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Switzerland To Amend US Mutual Assistance Order

by Ulrika Lomas,, Brussels

22 November 2011

Switzerland’s Federal Council has recently approved an amendment to the ordinance on the bilateral double taxation agreement (DTA) between Switzerland and the United States dating back to 1996, to ensure that the procedural rights of affected persons domiciled in the United States remain guaranteed even if administrative assistance requests are submitted based on certain patterns of behaviour.

Commenting on the decision, the Swiss federal administration stated that:

“Anyone affected by an administrative assistance request submitted to Switzerland by a foreign state is entitled to participate in the procedure.”

“If an affected person is domiciled abroad, he or she would be notified of the administrative assistance request by the holder of the information, eg a bank. If the holder of the information cannot reach the person, he or she is notified by the relevant US authorities.”

It noted, however, that this procedure is not currently applicable for administrative assistance requests based on certain patterns of behaviour; otherwise the affected persons would be disclosed to the US side before being able to assert their rights in Switzerland.

Consequently, the Federal Council amended the ordinance to ensure such persons are also informed correctly about administrative assistance requests, the administration continued, noting that the amendment to the ordinance governs the procedure for nameless requests in cases where the bank is unable to identify the affected persons at the request of the Federal Tax Administration (FTA) and inform them about the US administrative assistance request.

The latest announcement follows hot on the heels of the decision by the Swiss Foreign Affairs Committee of the Council of States, Switzerland’s upper house of parliament, to adopt a federal decree pertaining to an amendment to the 2009 bilateral double taxation agreement (DTA) in place between Switzerland and the US.

Intended to clarify the existing DTA, and to allow a broader reach, the amendment provides for the identification of US citizens alleged to have evaded taxes in Swiss bank accounts, based on patterns of behaviour, in cases where the name and bank details of the account holders are not known by the US tax authorities.

The amendment was approved by seven votes to three with two abstentions.

In accordance with the new provision, the Confederation will, however, only grant administrative assistance in tax matters in cases where there is clear evidence of a suspected offence.

The US authorities will be required to explain the pattern of behaviour and to clarify why the information is needed.

TAGS: tax | investment | business | offshore confidentiality | double tax agreement (DTA) | law | banking | offshore | agreements | legislation | offshore banking | banking secrecy | Switzerland | United States | legislation amendments

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