New Group Request from the Netherlands to the Swiss Tax Authorities
The Dutch group request and the persons affected
On 20 November 2017, the Netherlands filed a request for administrative assistance to Switzerland. The request concerns individuals whose names are unknown, and who between 1 February 2013 and 31 December 2016 (i) were accountholders at Bank Julius Baer & Co. Ltd. (hereinafter "Bank Julius Baer"), (ii) had a domicile address in the Netherlands, (iii) were threatened with termination of the banking relationship if they were unable to provide evidence of tax compliance and (iv) failed to provide Bank Julius Baer with proof of tax compliance. Accounts that were closed before 1 February 2013 or never exceeded the limit of EUR 1,500.00 are not affected by the request.
Persons affected by the request for administrative assistance are invited to provide the FTA with their Swiss address (in case of residence in Switzerland) or to appoint a representative in Switzerland (in case of domicile abroad). The deadline for reporting the aforementioned information to the FTA is 20 days (i.e. 26 February 2018).
If the persons affected by the request agree to the transmission of the information to the Dutch authorities, they must notify the FTA of their consent in writing. Otherwise, transmission of the information is ordered by the FTA and the persons affected must appeal to the Federal Administrative Court.
Group requests and fishing expeditions
According to the Double Tax Treaty, the FTA can only exchange information if the group request by the Dutch authorities concerns information that is "foreseeably relevant" for the application or enforcement of the Double Tax Treaty or Dutch domestic tax laws.
Group requests can therefore be problematic, as such requests cover a group of potential taxpayers based on certain common characteristics, as opposed to individual requests, which target individually identified taxpayers. For this reason, the Swiss Supreme Court considers a group request as permissible if the request a) includes a detailed description of the group of affected taxpayers along with the facts and circumstances that have led to the request; b) describes why there are grounds to believe that the taxpayers in the group have not fulfilled their tax obligations; and c) shows that the information requested can lead to the fulfillment of their tax obligations. There must thus be a clear connection to concrete circumstances that point to a violation of tax obligations, and there must be facts involved indicating illicit behaviour on the part of the members of the group.
However, requests which ask for information that is not foreseeably relevant are treated as so-called fishing expeditions. Fishing expeditions are not permitted, as they are speculative requests that have no apparent connection to an open inquiry or investigation. In fact, where the request relates to a group of taxpayers not individually identified, it will be more difficult to establish that the request is not a fishing expedition.
The case at hand
The Supreme Court's case law and the OECD Commentary raise the question of whether the Dutch group request might not be specific enough and thus constitute a prohibited fishing expedition. Since, in the present case, the request does not contain any names, the other circumstances must be described in more detail so that the requirement of foreseeable relevance can be met. If details are lacking, the request could be impermissible.
In fact, this request is very similar to a previous request from the Dutch tax authorities, which was decided on by the Supreme Court in September 2016. In this earlier request, the Dutch tax authorities submitted a similar group request asking for information about accountholders at the bank UBS. Whereas, in the UBS case, the Swiss Federal Administrative Court held that the request from the Dutch tax authorities violated the Double Tax Treaty because it did not include specific names of the UBS accountholders, the Supreme Court overturned that decision and stated that the Dutch tax authorities were not obliged to mention the names of the persons concerned, and hence administrative assistance could be provided (ATF 2C_276/2016, cons. 6.3). It was only necessary to sufficiently identify the persons concerned.
Considering that the Supreme Court allowed the transmission of the information to the Dutch authorities in that very similar case, it is likely that the information now requested in the case at hand will also be provided to the tax administration in the Netherlands. Nonetheless, it is important that accountholders at Bank Julius Baer concerned by the recent group request appoint a representative in Switzerland to ensure that information will not be exchanged with the Dutch tax authorities without their being granted access to the files. Furthermore, we also recommend that affected accountholders seek advice from an attorney or tax advisor in the Netherlands.