John Doe Summons Settlement & US - Swiss Double Taxation Treaty Process

On August 19, 2009 UBS AG announced the signing of a settlement agreement with the US Internal Revenue Service (IRS) and Department of Justice regarding the John Doe summons issued on 21 July 2008. At the same time the governments of Switzerland and the United States announced the signing of a related agreement.

In accordance with these settlements, on 31 August 2009, the IRS submitted a request for administrative assistance pursuant to the existing US-Switzerland Double Taxation Treaty with the Swiss Federal Tax Administration (SFTA), concerning approximately 4,450 accounts of US persons owned either directly or through an offshore company that are or had been maintained at UBS in Switzerland. Upon receipt of this request, the SFTA issued an order to UBS requesting that UBS provide to the SFTA the relevant information regarding account relationships that meet the specific criteria agreed between the U.S. and Swiss government under the standard of "tax fraud or the like" as set forth in the Swiss – US Double Taxation Treaty (DTT).

As stated by the SFTA, the accounts concerned are being evaluated to determine whether they fulfill the "tax fraud or the like" criteria set forth by the existing DTT. The specific criteria are set out in the annex to the Swiss – U.S. Government Agreement, published on November 17, 2009 by the SFTA.

UBS is now in the process of notifying clients that appear to be within the scope of the IRS Treaty Request and will provide to the SFTA on a rolling basis the requested account information, within the deadlines set out in the settlement agreement. Under the settlement agreement, UBS has to notify all affected clients and to provide all information to the SFTA no later than 270 days after it received the SFTA order on 1 September 2009. The SFTA will decide which of those accounts should be disclosed to the IRS, and such decisions will be subject to judicial appeal rights of affected account holders.