Swiss Court Rules Against UBS Data Handover

Igor S. Drabkin, J.D., Former IRS AttorneyOn January 22, 2010, an anonymous client of UBS AG won an appeal to prevent her account data from being handed over to U.S. authorities as part of a deal which was supposed to give details on 4,450 UBS clients to the U.S.  The Swiss administrative court said that the existing tax agreement with the United States only allowed for data to be disclosed in cases of “fraud or the like.”  The five-judge panel ruled that under Swiss law, the failure to file a W-9 form is considered the civil offense of tax evasion, not the crime of tax fraud.

Back in November, The Swiss justice department said that most of the people whose accounts were to be handed over to the U.S. authorities were suspected of serious fraud rather than simple tax evasion. The department said it would hand over the names of wealthy American clients of UBS with accounts holding more than 1 million Swiss francs ($986,200) where there was a reasonable suspicion of tax fraud. Accounts of a lesser size, as low as 100,000 Swiss francs, could be included in certain circumstances when there was a “scheme of lies” identified. The country would also hand over the names of U.S. citizens holding offshore company accounts with UBS if they were suspected of tax fraud or similar, regardless of whether they were resident in the U.S. or elsewhere.

The January 22nd decision casts doubt on whether Switzerland could hand over the accounts of people who did not give proper documentation, but did not act fraudulently.  Nevertheless, U.S. tax authorities said they expect the Swiss to honor the terms of that deal. The Swiss cabinet is supposed to discuss this week how to ensure the implementation of the Swiss-U.S. tax agreement following the court’s decision, it said in a statement.  UBS said it had taken notice of the court’s decision but did not comment further.

IRS offshore voluntary disclosure program, which expired on October 15, 2009, has yielded 14,700 names to the IRS.

If you have questions about the voluntary disclosure practice or foreign bank accounts, please contact us at (310) 550-6200.  Former IRS Attorneys of Holtz, Slavett & Drabkin can assist you with resolving your tax problems.

Author: Igor S. Drabkin, J.D., Former IRS Attorney.

Copyright (c) 2010 Igor S. Drabkin.  All Rights Reserved.