Swiss Court Halts Release of Some UBS Account Holder Data

A Swiss court has held that the Swiss bank UBS does not have to hand over to the IRS confidential data on 26 accounts under a settlement agreement between the United States and Switzerland negotiated in August 2009. Under the agreement, UBS is supposed to turn over for investigation information concerning approximately 4,450 accounts.

Failure to provide a Form W-9 to the IRS for at least three years is one of the IRS’ selection criteria for account holders who have engaged in “continued and serious tax offense.” UBS must identify such account holders under the agreement. However, in a suit brought by 26 unnamed account holders (U.S. Taxpayers v. Swiss Federal Tax Administration), Switzerland’s Bundesverwaltungsgericht (federal administrative tribunal) held on Jan. 22 that the mere failure to file a Form W-9 does not by itself amount to tax fraud. Therefore, the court ruled that the account holders’ data cannot be handed over to the IRS.

While this case only concerned 26 account holders, it is unclear what effect it will have on the other approximately 4,400 accounts potentially subject to the agreement. According to the tribunal’s press release, the decision cannot be appealed in Swiss federal court.

The August settlement agreement represented a compromise between the two governments over a contested “John Doe” summons in U.S. v. UBS AG, a case filed in the U.S. District Court for the Southern District of Florida.