Philippe Kenel

 

International administrative assistance in tax matters in practice

 

Philippe Kenel, Doctor of Law, Attorney-at-Law in Lausanne, Geneva and Brussels, Python & Peter

 

In order to consistently implement the procedural aspects of administrative assistance in tax matters, the Swiss parliament approved the Federal Act on International Administrative Assistance in Tax Matters (LAAF) on 28 September 2012.

 

The competent authority in Switzerland is the Swiss Federal Tax Administration (FTA).

 

Administrative assistance should comply with the following three principles. First, administrative assistance is granted only upon a request, which precludes automatic exchange of information and spontaneous administrative assistance. However, group administrative assistance is possible. Second, the administrative assistance procedure shall be conducted diligently. Finally, the transmission of information about persons who are clearly not involved in a matter under investigation is prohibited.

 

If the double taxation treaty applicable in the case provides no information on the content of the application and no other legislation is referred to by the treaty, the application must include the following information:

 

  1. The identity of the person concerned, which may be provided other than by simply providing the person’s name and address;
  2. The information sought and the form in which the requesting State wishes to receive such information;
  3. The fiscal purpose for which the information is requested;
  4. The reasons why the information requested is believed to be held in Switzerland or in the possession or under the control of a holder of the information residing on Swiss soil;
  5. The name and address of the purported holder of the information, to the extent that they are known;
  6. A statement that the application complies with the laws, regulations and administrative practices of the requesting State, so that if the requested information was within the jurisdiction of the requesting State, the requesting authority would be entitled to obtain it under its laws or in the normal course of administrative practice;
  7. A statement specifying that the requesting State has used all means available under its national tax procedure rules.

 

The legislature has expressly provided that the FTA should not consider an application if it is made for the purpose of finding evidence or if it violates the principle of good faith, especially when based on information obtained by an action which is punishable under Swiss law.

 

The FTA is entitled – in order to obtain the information – to contact the person in question (the person about whom the information is requested under the request for administrative assistance) if that person has limited or unlimited tax liability in Switzerland, the information holder (the person who holds the information requested in Switzerland), the cantonal tax authorities, or any other Swiss federal, cantonal or municipal authority.

 

Information held by a bank, other financial institution, agent, officer or trustee, or information regarding the person’s property rights may be requested only if the applicable treaty provides for its transmission, as does Article 26, Paragraph 3 of the OECD model convention.

 

In certain cases, coercive measures may be ordered.

 

The FTA has an obligation to inform the person whom the request for administrative assistance concerns, as well as all other persons who may be assumed, based on the file, to be entitled to appeal, unless the foreign authority has issued plausible reasons for secrecy of the proceedings.

 

Persons who are domiciled in Switzerland are contacted directly by the FTA. However, for persons domiciled abroad, the FTA invites the holder of the information to designate a representative in Switzerland authorized to receive notifications. This might be, for example, a lawyer.

 

As to the transmission of the information, there are two procedures available to persons entitled to appeal. First, by granting their irrevocable consent to the FTA to the delivery of the information to the requesting authority, they accept the use of the simplified procedure. If this is not the case, the FTA will use the ordinary procedure by issuing to every person who is entitled to appeal a final decision justifying the granting of mutual assistance and specifying the extent of the information to be transmitted.

 

The appeal procedure against the FTA’s ruling entails that only a final ruling can be appealed. Any previous ruling, including a ruling on coercive measures, is immediately enforceable and can only be appealed in conjunction with a final ruling.

 

Once the final ruling or the appeal ruling comes into force, the FTA transmits the information to be exchanged to the requesting authority.