18/07/22

INDIA: Swiss Top Court Quashes Move To Stall Offshore Bank Info Transfer.

As published on india.com, Monday 18 July, 2022.

In a big win for Indian tax authorities in fight against black money, the Federal Supreme Court in Switzerland has ruled that even if persons who are ultimate beneficiaries have not received any money from secret offshore trusts and numbered bank accounts, the Swiss authorities can still go ahead with sharing such confidential information with India, according to a report by Economic Times. The ruling has dashed hopes of many resident Indians who were banking on the court to stall, or at least delay, the flow of data to the income-tax department here.

The report said that counsels hired by rich Indians have argued before the Swiss courts that such personal financial information has no relevance to the Indian tax office as beneficiaries cannot be taxed in the absence of any distribution of funds from foreign trusts.

However, over the last two weeks, the Swiss court has laid down in multiple rulings that it would not sit in judgement on why Indian authorities have sought information and whether they can claim tax on the back of such data. According to court, Switzerland will share information if India seeks it without judging the data’s ultimate relevance and end use, the ET report said.

The rulings pertain to foreign trusts in tax havens with multiple beneficiaries, some of which are linked to large Indian business families. Wealthy Indian families often use a common structure to hold funds away from the prying eyes of the Income Tax department is through ‘discretionary trusts’. In such trusts, trustees have the discretion to distribute the income, capital gains, or principal amounts from the trust to the beneficiaries. Typically, such a trust holds shares of a company, incorporated in the same or in a different tax haven that have accounts with a Swiss bank. Members of a family are named as beneficiaries of such trust.

Tax appellate bodies have have attempted to look through the veil separating the trust and the beneficiaries on the grounds the latter indirectly controlled the trust by handpicking trustees who they appointed.

The verdicts may diminish the legal recourse available to Indians – or individuals of other nationalities with secret bank accounts and tax haven structures – trying to prevent their respective governments from accessing information on wealth, the report added.