After months of negotiations, UBS announced it has signed a formal agreement with the IRS to end the cross-border dispute regarding alleged tax-evading UBS American clients. As a result, the names of approximately 4,450 American clients of the firm may be handed over to U.S. authorities.
According to the release, to get the names the IRS will now have to submit a “request for administrative assistance pursuant to the existing U.S.-Switzerland Double Taxation Treaty to the Swiss Federal Tax Administration (SFTA).” The Swiss asset manager will then provide account information on the roughly 4,450 accounts to the SFTA, which will then determine which of the accounts will be disclosed to the IRS.
UBS plans to simultaneously send notices to the 4,450 clients encouraging them to take advantage of the IRS’ tax amnesty program. Many Americans with offshore accounts, some of them in European banks, have come out of hiding recently to take advantage of U.S tax amnesty program. Under the amnesty program, account holders must pay 20 percent of the amount of tax that was underpaid for the past six years and 20 percent of the highest value of the account over the past six years, in addition to all their unpaid taxes and interest due on those taxes, according to the Department of Justice. That compares to a fine of 50 percent of an account’s value for each year it was held without notifying the IRS. The amnesty program ends September 23.
In February, UBS admitted to helping American clients hide their assets in UBS accounts. It paid a $780 million penalty as well as turned over the names of about 300 American clients in a deferred prosecution agreement with the Justice Department. While tax fraud is a violation of Swiss law, tax evasion is not. Since the February fine, three of the 300 named clients have pleaded guilty to tax charges in federal court.