Switzerland: Swiss Supreme Court Clarifies Illicit "Fishing Expeditions" In International Tax Assistance Procedures

Last Updated: 23 February 2017
Article by Thomas Rihm

On July 23, 2015, the Dutch tax authorities filed with the Federal Tax Administration Agency in Switzerland a request for international tax assistance in order to identify prospective Dutch taxpayers through certain group criteria but w/o providing the specific names of those potential taxpayers. The request targeted holders of bank accounts with UBS in Switzerland (this between February 1, 2013, and December 31, 2014), who had a (tax) domicile address in the Netherlands, and who did not comply with a previous UBS-notice to confirm their tax conformity for the Netherlands.

The Swiss Federal Tax Administration Agency approved this group inquiry in a decision of November 25, 2015, which was now upheld by the Swiss Federal Supreme Court on September 12, 2016 (but only published last week). The decision of Switzerland's highest court is a leading case as it sheds light on the various double taxation treaties concluded by Switzerland since 2009 in order to establish conformity with OECD-standards which allow since 2012 so-called group inquiries.

"The Swiss Federal Supreme Court clarified the much disputed topic as to whether Switzerland's International Tax Assistance Act of 2012 prevails over the country's tax treaties concluded since 2009."

The applicable Swiss/Dutch taxation treaty was amended on November 9, 2011, in order to bring it in line with information exchange standards of the OECD Model Convention on Income and Capital Taxation, which basically allows group inquiries since July 17, 2012 (the date when the official OECD-Commentary gave its interpretation to that end), whilst the amended treaty wording still required that the tax authority requesting certain tax relevant information provide the specific names of the potential taxpayers. Furthermore, Switzerland enacted on September 28, 2012, an International Tax Assistance Act, which allows group inquiries, so a dispute arose in first instance as to whether this act should prevail over the Dutch/Swiss Treaty or vice versa.

In its September 12, 2016 decision, the Swiss Federal Supreme Court clarified the latter much disputed topic by saying that Switzerland's International Tax Assistance Act of 2012 cannot overrule the tax treaties concluded by Switzerland with foreign countries since 2009, since it was enacted only to secure the due execution of international tax assistance inquiries.

"The hightest court in Switzerland considers the Dutch tax assistance request as a classical borderline-case."

In other words, the Swiss Federal Supreme Court held that the issue of permitted group inquiries vs. non-permitted fising expeditions should be decided by exlusively referring to the applicable tax treaty. The Swiss Federal Supreme Court argued that Art. 26 of the Dutch/Swiss tax treaty amended as per November 9, 2011, should be interpreted by referring to a subsequent protocol and a memorandum of understanding signed by the two countries which provide in conjunction that an international tax assistance request does not necessarily have to indicate specific names of potential taxpayers, as long as other information submitted through an international tax assistance request is sufficiently specified. The hightest court in Switzerland thereby considered the additional information provided by the Dutch tax authorities in its request for international tax assistance of July 23, 2015 (see above) as sufficient, though the court spoke at the same time of a "borderline-case".

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