On January 22, 2010, the Swiss Federal Administrative Court published its first judgment with respect to the IRS's request for information. The case relates to a UBS client who failed to provide the bank with a Form W-9.
The Swiss court ruled against the IRS and stated that no information will be provided by UBS to the IRS. The judgment is final and is not subject to appeal. The judgment holds that the U.S. Treasury agreement with the Swiss government dated August 19, 2009, is merely a Memorandum of Understanding and does not derogate the U.S.-Swiss income tax treaty. The court further concluded that the failure to provide the bank with Form W-9 does not amount to tax fraud.
This decision is now persuasive on all other cases pending in Swiss courts with respect to disclosure of information to the IRS on accounts of U.S. citizens.
This decision is good news for US taxpayers, but maybe insufficient in the long run. It is expected that the Obama administration will continue to exert pressure on the Swiss government to amend the U.S.-Swiss income tax treaty, allowing disclosure of information relating to Swiss bank accounts. If the tax treaty is amended and the amendment is ratified by the Swiss parliament, this court decision will be moot.
For now, there is a glimmer of hope for U.S. taxpayers with unreported Swiss bank accounts.