UBS news

Formal signing of settlement agreement relating to the John Doe summons

Zurich / Basel Price Sensitive Information

  • Agreement does not call for any payment

  • Parties will promptly file a stipulation with the court dismissing the enforcement action relating to the John Doe summons

  • IRS will submit request for administrative assistance pursuant to the existing US-Switzerland Double Taxation Treaty

  • US and Swiss governments expect that approximately 4,450 accounts will be provided to the Swiss Federal Tax Administration in response to this treaty request

  • UBS will send notices to affected US persons encouraging them to participate in the IRS's voluntary disclosure practice

  • Agreement also resolves all issues relating to the alleged breaches by UBS of the Qualified Intermediary Agreement

UBS AG announced today the formal signing of a settlement agreement with the US Internal Revenue Service (IRS) regarding the John Doe summons issued on 21 July 2008. The summons has been the subject of a civil action in the United States District Court of the Southern District of Florida. The principal terms of this settlement agreement and the related agreement entered into at the same time by the governments of Switzerland and the United States are described below:

The agreement does not call for any payment by UBS. Moreover, it resolves all issues relating to the alleged breaches of UBS's Qualified Intermediary Agreement with the IRS as set forth in the Notice of Default dated 15 May 2008.

As part of the settlement, the parties will promptly file a stipulation with the court to dismiss the enforcement action relating to the John Doe summons.

In accordance with the separate agreement between the United States and Switzerland, the IRS will submit a request for administrative assistance pursuant to the existing US-Switzerland Double Taxation Treaty to the Swiss Federal Tax Administration (SFTA). This request will seek information relating to certain accounts of US persons maintained at UBS in Switzerland. It is expected that approximately 4,450 accounts will be provided to the SFTA in response to this treaty request. The SFTA will decide which of those accounts should be disclosed to the IRS, and such decisions will be subject to judicial review.

UBS is required to provide information on the accounts covered by the treaty request to the SFTA and to send notices to affected US persons encouraging them to take advantage of the IRS's voluntary disclosure practice and to instruct UBS to send their account information and documentation to the IRS. The US government will withdraw the John Doe summons with prejudice as to all accounts not covered by the treaty request no later than 31 December 2009, provided that UBS has complied with those obligations that are required to be performed by that date.

The US government will withdraw the John Doe summons with prejudice as to the remaining accounts – those subject to the treaty request - no later than 24 August 2010 upon the actual or anticipated delivery to the IRS of information relating to accounts covered by the treaty request that does not differ significantly from the expected results. In addition, the summons will be withdrawn with prejudice as to those remaining accounts if at any time on or after 1 January 2010 the IRS has received information relating to at least 10,000 accounts of US persons maintained at UBS in Switzerland. The sources of such information include, in addition to the treaty request itself, the IRS's voluntary disclosure practice, client instructions to UBS to send account information to the IRS and the Deferred Prosecution Agreement.

If neither of these events were to occur by 24 August 2010, the two governments would confer and consult in order to consider alternative mechanisms for achieving the expected levels of account information exchange expected to occur through the treaty request. Possible measures will not impose any financial or new, non-financial obligations on UBS. If these efforts were not successful, the John Doe summons could remain in place beyond 24 August 2010 as to the portion of the accounts covered by the treaty request that have not otherwise been disclosed to the IRS.

UBS Chairman Kaspar Villiger said: "This agreement helps resolve one of UBS's most pressing issues. I am confident that the agreement will allow the bank to continue moving forward to rebuild its reputation through solid performance and client service. UBS welcomes the fact that the information-exchange objectives of the settlement can be achieved in a lawful manner under the existing treaty framework between Switzerland and the United States."