Monthly Archives: November 2011

The Swiss government has ordered Credit Suisse, the country’s second-largest bank, to hand over information on undeclared bank accounts held by U.S. taxpayers, a move that represents the latest escalation of U.S. efforts to tear down Switzerland’s previously impenetrable wall of banking secrecy.

Credit Suisse AG, Switzerland's second-largest bank, has begun notifying certain U.S. clients suspected of offshore tax evasion that it intends to turn over their names to the U.S. Internal Revenue Service, with the help of Swiss tax authorities.

The bank has been asked by the U.S. Internal Revenue Service to provide the requested information in line with an existing 1996 bilateral tax treaty between Switzerland and the United States, a Credit Suisse spokesman confirmed Nov. 8.

Credit Suisse mailed letters Nov. 2 to certain U.S. clients notifying them that the bank has been ordered to deliver information to the Swiss authorities, the spokesman said. The clients have also been told they must provide the Swiss authorities the name of a person authorized in Switzerland to receive legal documents and orders on their behalf.

The move by Credit Suisse to disclose American client names and account information is the latest twist in a showdown between Switzerland and the United States over the battered tradition of Swiss bank secrecy.

U.S. authorities, who suspect tens of thousands of wealthy Americans of evading billions of dollars in taxes through Swiss private banks in recent years, are conducting a widening criminal investigation into scores of Swiss banks, including Credit Suisse.

It is unclear how many American clients of Credit Suisse hold private banking accounts that have gone undeclared to U.S. tax authorities.

For more information go to Reuters.

1. Status is modified if the single owner of the entity is a bank. Treas. Regs. Section 301.7701-2(c)(2) (iii). 

2. Status is modified for certain tax liabilities. Treas. Regs. Section 301.7701-2(c)(2)(iii). These include: (1) federal tax liabilities of the entity with respect to any taxable period for which the entity was not disregarded; (2) federal tax liabilities of any other entity for which the entity is liable; and (3) refunds or credits of federal tax. 

3. Disregarded status ignored or modified for taxes imposed under Subtitle - Employment Taxes and Collection of Income Tax (Chapters 21, 22, 23, 23A 24, and 25 of the Code) and taxes imposed under Subtitle A including Chapter 2 - Tax on SelffEmployment Income. Treas. Regs. Section 301.7701-2(c) (2) (iv) (A). 

4. Status is modified for certain excise taxes, as described in Treas.Regs. Section 301.7701-2(c)(2J(v). Although liability for excise taxes isn't dependent on an entity's classification, an entity's classification is relevant for certain tax administration purposes, such as determining the proper location for filing a notice of federal tax lien and the place for hand-carrying a return under Code Section 6091

5. Conduit financing proposed regulations will treat a disregarded entity as separate from its single member. Code Section 7701 (I).

6. Special rules will apply in hybrid situations. Hybrid situations are circumstances where an entity is not disregarded in one jurisdiction but is disregarded in another.

President Nicolas Sarkozy Nov. 4 named 11 jurisdictions that he said the world's leading economies consider “tax havens,” because they have failed to adequately adopt or implement legal systems to allow tax information exchange and transparency.

Countries Identified as Havens.

In his final press conference in which he described summit outcomes, Sarkozy said that, in a report to the G-20, the Global Forum on Transparency and Information Exchange for Tax Purposes, fingered:

• Antigua
• Barbados
• Botswana
• Brunei
• Panama
• the Seychelles
• Trinidad and Tobago
• Uruguay and
• Vanuatu

He said the reports name two more, Liechtenstein and Switzerland, that he said have failed to adequately implement information exchange mechanisms that they have recently adopted.

“Countries that remain tax havens with banking secrecy will have to answer to the international committee,” Sarkozy warned.

OECD Comment.
The Organization for Economic Cooperation and Development, which hosts the Global Forum, cautioned that the 11 countries Sarkozy named, which are all forum members, have committed to make changes to improve their information exchange.

Another BLACK LIST? 

Stay Tuned!

ZURICH, Nov 4 (Reuters) - Switzerland has not offered a financial settlement to end a U.S. tax investigation into a number of Swiss banks but remains willing to hand over bank client names as part of any deal, a government spokesman said on Friday.
Basler Kantonalbank , Credit Suisse and Julius Baer are among 11 Swiss banks under investigation in connection with allegations they helped Americans dodge taxes.

Mario Tuor, a spokesman for the Swiss department responsible for international financial affairs, reiterated Switzerland's stance that client names could be transferred under existing double-taxation treaties.

While Switzerland has expressed an interest in sealing a deal for the whole banking sector, Tuor would not comment on a report that the government had offered a deal for the country's more than 300 banks.

"I assume that we will find a solution by the end of the year," she told the weekly Bilanz, adding Switzerland would continue to refuse any so-called 'fishing expeditions', or broad requests for bank client data with little evidence.

But parliament should deal with a government proposal to allow U.S. authorities to request help finding names of suspected tax dodgers based on defined behavioural patterns in its December session, she told Bilanz.

Credit Suisse said earlier this week it had taken a provision of 295 million Swiss francs ($334 million) for settling the U.S. investigation, suggesting a deal might be near. It said the final settlement might exceed the current provision.

Asked whether Credit Suisse would have to hand over more client details than the 4,450 UBS had to provide, Widmer-Schlumpf said Switzerland would only deliver more bank data when its courts had denied any client appeals.