Special problems of international tax planning of private investments, including international administrative and legal assistance in tax matters

Case study 1 "AIA - briefly explained

Basic facts

A is tax resident in Australia and maintains a bank account in Switzerland with Bank B.

Questions:

1. Does an automatic exchange of information take place in this case?
2. What is the process of such an automatic exchange of information? What kind of information is exchanged?
3. Is information also exchanged if A is resident in Turkey for tax purposes?

Variant "simple trust structure

The Settlor is tax resident in Canada and established a trust on the Cayman Islands two years ago. The trust maintains a Swiss bank account with Bank B.

Questions:

1. Does an automatic exchange of information take place in this case? If so, what information is exchanged from which country to whom?
2. If the trust is established in the USA, how is the above question to be answered?

Variant "more complex trust structure

The Settlor is tax resident in the United Arab Emirates. The Trust was established in the BVI. The beneficiaries are located in Argentina, while the Protector is located in Canada. The trust maintains a bank account in Switzerland with Bank B and makes regular payments to the beneficiaries.

Question:

How does an automatic exchange of information take place? Who has to transmit which information to whom?

Case study 2 "The clandestine life insurance contract".

Basic facts

During a home investigation, the tax investigation authority of state A discovered an e-mail correspondence between taxpayer Y and the Swiss life insurance company Vitaris. The tax authority of State A now wants to check whether the taxpayer has concluded a life insurance contract with the Swiss life insurance company that qualifies as a life insurance coat under its law.

Questions:

1. The tax authority of State A directly requests the life insurance company Vitaris by letter to provide information on whether Y has concluded a life insurance contract with it. If so, the contracts concluded should be handed over to it. May Vitaris provide the information?
2. Does anything change if Vitaris is authorised under the General Terms and Conditions to provide information to domestic and foreign authorities on the life insurance contracts it has concluded?
3. After Vitaris has not responded to the request, the tax authority of State A decides to submit a request for administrative assistance. It requests the disclosure of all insurance information concerning taxpayer Y that is in the possession of Vitaris or its foreign subsidiaries. Does Switzerland have to hand over the information?
4. State A is Germany. Would Switzerland have been obliged to transmit the insurance information as part of the automatic exchange of information?

Variant

Following the e-mail correspondence discovered by the tax investigation authorities, Y informed himself at the Liechtenstein subsidiary of Vitaris about the possibility of concluding a life insurance contract. Because of the Liechtenstein insurance secrecy, the tax authorities of State A decided to send a request for administrative assistance to Switzerland. State A requests information as to whether Y indirectly holds assets in a Swiss bank through a life insurance shell concluded with the Liechtenstein life insurance company. If so, all relevant bank information should be disclosed.

Questions:

1. Does Switzerland have to provide the requested information?
2. What changes if the tax authority is that of the United Kingdom?

Case study 3 "Timeliness of (unpunished) voluntary disclosure (natural person)

Facts

X, who has unlimited tax liability in Canton Schwyz, emigrated from Italy more than thirty years ago. With his savings he built a residential property in his place of origin, which he uses during his stays. To cover his maintenance costs, he has opened a bank account with a local bank in his place of origin, the balance of which is around EUR 30,000. X has authorised a family member resident in the village to handle the payments. He has the bank's correspondence sent to the address of his residential property in Italy.

Questions:

1. In 2017, X files a self-denunciation in which he declares both the residential property and the bank account in Italy. Is this effective?
2. Does the assessment change if X has unlimited tax liability in the Canton of Zurich?
3. What is the legal situation if X has the correspondence sent to his address in Switzerland?

Case study 4 "Timeliness of voluntary disclosure (legal entity)

Facts

Y, who comes from Austria, lives in the canton of Schwyz. He is the beneficiary of an Austrian private foundation established by his late father. For years he has been receiving benefits from this foundation, which he has not yet taxed in Switzerland. In June 2017, he will visit his trustee to inform him about the previously untaxed income.

Questions:

1. Will the trustee advise him to file a voluntary disclosure?
2. Would this assessment change if the foundation had its seat not in Austria but in Liechtenstein?
3. Would the initial situation change if Y were subject to unlimited tax liability in the Canton of Zurich?

Case study 5 "Admissible request for assistance or inadmissible fishing expedition?

Facts

The (German) Federal Central Tax Office has submitted a large number of requests for administrative assistance to the FTA, in which it states that a German taxpayer has opened a numbered account under account number XYZ at a major Swiss bank. The name of the account holder was not known to the German tax authorities. However, they suspect that the account holder had neither the capital invested in the account nor its income taxed in Germany.

Questions:

1. May the FTA respond to this request for assistance?
2. Is this an individual request or a group request?
3. Does it matter whether the account holder has generated income subject to income tax?

Case study 6 "Delimitation of administrative/legal assistance

Facts

On 17 March 2015, the US tax authorities (IRS) submitted two requests for administrative assistance to the FTA for bank accounts Nos. 13 and 14 with Bank A AG. The requests for administrative assistance relate to the period from January 1, 2008 to December 31, 2013. The IRS suspects that these two accounts were used to avoid US taxes in such a way that the facts of tax fraud or similar crimes would be fulfilled. The requests meet the formal requirements.

The FTA received information from Bank A AG that the accounts are in the names of companies A and B and that X is the beneficial owner of these two accounts. X gave up his US citizenship on 10 July 2012 when he emigrated from the United States.

On 21 July 2015, the FTA decided to provide administrative assistance for the period from 1 January 2008 to 9 July 2012 with respect to X as the person concerned and with respect to companies A and B as additional persons entitled to file complaints. X filed an appeal against this decision with the Federal Administrative Court and demanded that the decision of the FTA be set aside.

The Federal Administrative Court partially upheld the appeal by adding the following sentence to the FTA's dispositive:

"Data that is not expected to be relevant, such as the names of bank employees, including the names of lawyers/notaries, and identifying data (e.g., e-mail addresses, telephone numbers), must be blacked out before the information is submitted to the IRS".

It dismissed the remainder of the appeal. On the other hand, the FTA lodged an appeal in matters of public law with the Federal Supreme Court, demanding that this addition be deleted and that its original decision be confirmed.

Questions:

1. How to decide? On what basis?
2. What option would the IRS have to get the blackened data anyway?

List of enclosures

General: Manuscript basic paper on tax office assistance according to the OECD standard and on the automatic exchange of information

Case 6: BGE 144 II 29 of 18 December 2017