03 July 2019

US Senate to consider loosening restrictions on exchange of information between the US and Switzerland


The protocol proposing to amend the United States Tax Treaty with Switzerland was cleared by the US Senate Foreign Relations Committee on June 25, 2019. By clearing the committee stage, the protocol that would amend the US/Swiss Tax Treaty can now be considered by the full US Senate – with indications from members of the US Senate that the vote may happen as early as August of this year. If the protocol is approved by a 2/3 vote in the US Senate it will be passed to the President’s office for ratification.

The significant area of the Treaty to be amended by the protocol are the rules and standards involved with the exchange of information between the United States and Switzerland. Under the treaty in place now, the exchange of information between the United States and Switzerland is only allowed if it is necessary for the prevention of “tax fraud or the like.” The new standard will be that information may be exchanged if it “may be relevant to the administration or enforcement of the domestic laws concerning taxes covered by the Convention” (ie, Treaty).

Under the proposed amendment there are certain safeguards in place to prevent fishing expeditions for incriminating tax information such that information cannot be exchanged on an automatic or spontaneous basis. Under the proposal, any information request must contain information:

(i) sufficient to identify the person under examination or investigation;
(ii) the period of time for which the information is being requested;
(iii) a statement of the information sought;
(iv) the tax purposes for which the information is sought; and
(v) the name, and to the extent known, the address of any person believed to be in possession of the requested information.

Although there are these safeguards in place under the existing Treaty, under the proposed amendment there is no obligation for the requesting authority to show prima facie evidence of a tax offence and the requesting authority is not required to provide the name of the person under examination; rather, a requesting authority only has to provide enough information such that the targeted person can be identified.

Although this proposal that would amend the US/Swiss Tax Treaty has not yet been ratified by the US Senate, taxpayers with connections to the United States and Switzerland should be aware that as early as August of this year the ease of exchange of information between the two countries may increase and new information may be shared under the more relaxed rules and standards proposed in the protocol.

Authors

Category: Article