Owen, Christopher: Global Survey – May 2017

21 April 2017, the Full Federal Court dismissed an appeal by US oil and gas multinational Chevron against the Australian Taxation Office’s (ATO) assessment of A$340 million in taxes and penalties. The decision is significant in determining the arm's length consideration applicable to cross border financing arrangements.

In Chevron Australia Holdings Pty Ltd v. Commissioner of Taxation [2017] FCAFC 62, the case related to the deductibility of interest on a US$2.5 billion loan made in 2003 to Chevron Australia Holdings Pty Ltd (CAHPL) by Chevron Texaco Funding Corporation (CFC), a subsidiary incorporated in the US state of Delaware.

CFC raised the money for the loan at an interest rate of 1.2% but charged a 9% interest rate to CAHPL. This disparity significantly reduced the tax paid by CAHPL in Australia, which could deduct interest repayments from its taxable income, and allowed CFC to make big profits on the difference between the borrowing rate and lending, which were untaxed in the US.

The ATO challenged the amount of the interest payments under both Division 13 of the Income Tax Assessment Act 1936 (ITAA 1936) and Subdivision 815-A ITAA 1997 from 31 December 2004 to 31 December 2007. The ATO claimed that the company's interest deductions on the loan were far higher than a normal arm's-length basis and increased Chevron’s tax bill for the years 2004 to 2008 by $340 million.

CAHPL challenged the assessment claiming that the interest on the loan was charged at arm's length and complied with the transfer pricing rules. In October 2015, the Federal Court held in favour of the ATO, finding that the effect of the internal financing structure was to reduce Chevron’s Australian taxable income by claiming interest payments as deductions. Chevron appealed.

The Full Court of the Federal Court of Australia unanimously upheld the trial judge’s ruling that the loan was not a genuine "arm's length" transaction and breached transfer pricing provisions of tax legislation. The law, the court said requires the terms of such loans don't "exceed what would be regarded as an arm's length price expected to be incurred between independent parties dealing with each other at arm's length.” It further ordered Chevron to pay the ATO’s costs.

Justice James Allsop agreed with the trial judge that the $2.5bn loan was chosen because it “was the most tax efficient corporate capital structure and gave the best after tax result for the Chevron group”. Allsop said that if the loan between the related parties had been independent and at arm’s length, Chevron would have provided a guarantee over the loan, securing finance at a rate “significantly below 9%”.

The ATO has issued bills totalling $2.9 billion to seven multinational companies and is currently auditing 59 multinational corporations and hundreds of other companies to ensure compliance with taxation laws including the new Multinational Anti-Avoidance Law (MAAL). A spokesperson said: "This decision is significant and has direct implications for a number of cases the ATO is currently pursuing in relation to related party loans, as well as indirect implications for other transfer pricing cases.”

Chevron said it was “disappointed” with the decision. “We will review the decision to determine next steps, which may include an appeal to the High Court of Australia,” it said.

29 December 2016, the Trusts (Choice of Governing Law) (Amendment) Act 2016, the Trustee (Amendment) Act 2016 and the Automatic Exchange of Financial Account Information Act 2016 were published in the Official Gazette.

The Trusts (Choice of Governing Law) (Amendment) Act 2016 expands the provision relating to foreign law and the trust under Bahamian law to provide enhanced protection for trusts from attempted enforcement of judgments arising from family disputes and forced heirship rules.

The Trustee (Amendment) Act 2016 amended the Trustee Act 1998 to provide for clarification of the law relating to trustee indemnities, to enable settlors and donors of property to a trust to benefit from provisions in a trust relating to restrictions against alienation, and to insert a new Section 91C giving statutory effect to the rule in Re Hastings-Bass.

The Automatic Exchange of Financial Account Information Act, 2016, which came into force in The Bahamas on 1 January 2017, facilitates the implementation and enforcement in The Bahamas of the OECD’s Common Reporting Standard (CRS) for automatic exchange of tax information between jurisdictions as opposed to the bilateral exchange of information based on a request. When the necessary bi-lateral agreements are entered into, the first reporting will occur in 2018, based on 2017 financial information.

The Financial Secretary in the Ministry of Finance is designated as the Competent Authority for the purposes of the Act, and is empowered to: enter into agreements with other countries for the automatic exchange of financial information in tax matters; receive and exchange information reported under the Act; and enforce compliance with the provisions of the Act and its regulations.

The Act imposes four key obligations on Reporting Financial Institutions (RFIs):

• Registration – RFIs must apply to the Competent Authority to be registered by 30 March 2017;
• Identification of Reportable Accounts – RFIs must identify account holders of any reportable accounts by applying the due diligence rules and procedures under CRS, the Bahamian anti-money laundering regime or similar requirements to which the RFI is subject;
• Obtain and file information returns – RFIs are required to obtain and file information returns relating to financial accounts maintained with them; and
• Keeping of Reports – RFIs are required to keep reports that will be prescribed in the regulations and hold those reports for a minimum of five years.

Generally, RFIs include custodial institutions, depository institutions, investment entities and specified insurance companies that are organised under the laws of The Bahamas (excluding any branches outside of The Bahamas) or are organised under a foreign law, with a branch in The Bahamas.

30 March 2017, Federal Law 13,428 was enacted to provide for the reopening, by a further 120 days, of the Brazilian Special Regime for Tax and Exchange Legalisation (RERCT), which offers a mechanism for Brazilian taxpayers to regularise their tax affairs without facing criminal prosecution.

Originally launched in January 2016, RERCT attracted more than 25,000 individuals and 103 companies to declare offshore assets worth more than BRL169.9 billion (US$54 billion) before it closed on 30 October, netting BRL50.9 billion in taxes and penalties.

The new deadline to disclose will be 31 July 2017 and the applicable overall cost for joining has been increased from 30% – a one-off tax charge of 15%, plus a 15% penalty – to 35.25%. In addition, taxpayers will have to use the less favourable Brazil Real to US Dollar exchange rate from 30 June 2016.

13 April 2017, the Cayman Islands Department for International Tax Cooperation issued guidance for financial institutions on the common reporting standard (CRS) for automatic exchange of financial account information.

The Guidance Notes were issued under regulation 5(2) of the Tax Information Authority (International Tax Compliance) (Common Reporting Standard) Regulations, 2015 by the Tax Information Authority as the competent authority.

The document provides guidance on aspects of the common reporting standard that are particular to Cayman Islands and further clarifies the Cayman Islands common reporting standard regulations, which came into force in 2016.

30 March 2017,   investigators searched Credit Suisse offices in the Netherlands, UK and France for information about “dozens of people who are suspected of tax fraud and money laundering”. Dutch prosecutors, who co-ordinated the raids, said criminal investigations had also taken place in Germany and Australia.

The Dutch prosecutor’s office told the Financial Times that it was acting on information “about people who had an account with a Swiss bank in the past”. “We found out that some of those Dutch clients still have an account,” the prosecutor’s office added. Australia’s tax office said that they had intelligence “which supports our view that some of the accounts identified are active and in use”.

31 March 2017, the Bundesrat, the upper house of Germany’s Parliament, approved key changes to a bill facilitating adoption of the EU anti-money laundering and tax avoidance directives, under which Germany’s beneficial ownership register for companies could be made available to the general public.

The original bill, adopted by the Cabinet on 22 February, granted registry access only to internal authorities, with limited exceptions for approved journalists and NGOs. The Bundesrat, however, determined that the general public also be granted access.

Both houses of the German parliament must agree to all changes and pass the bill before 26 June in compliance with the timetable for the Fourth EU Anti-Money Laundering Directive (EU 2015/849).

13 April 2017, the new Trusts Registration Service, which will be launched in June, will provide a single online route for trusts and estates to comply with their registration obligations, according to the latest HMRC Trusts and Estates Newsletter. As well as implementing the requirements of the Fourth Money Laundering Directive (4MLD), the register will be in line with HMRC’s digital strategy and provide greater tax transparency going forward.

All trusts with a UK tax consequence will need to be registered. Also, trustees must ensure and confirm the Trust Register is accurate and up to date, guaranteeing their obligations under 4MLD are complied with. Trustees will need to update the register each year that the trust generates a UK tax consequence.

This includes those trusts that have already registered with HMRC using the 41G(Trust) form, which will no longer be accepted from the end of April 2017. Registration does not apply to trusts that have closed, where the trustee or their agent has received a letter from HMRC stating that the trust has ended.

Any new trusts with a UK tax consequence will be required to use the registration service to obtain a unique taxpayer reference (UTR). The register will ask for details of the trust assets including address(es) and values, the identity of the settlor, trustees, protector (if any), all other persons exercising effective control over the trust (if any) and the beneficiaries or class of beneficiaries.

The information required will include: name, date of birth, National Insurance (NI) number if they are UK resident (unless a minor) and an address and passport or ID number for non-UK residents, if there’s no NI number.

The Register will also provide a single point of access for personal representatives and their agents to register complex estates and update their records online, replacing the current paper process for personal representatives to notify changes in their circumstances. New complex estates will be required to use the registration service to obtain a unique taxpayer reference (UTR).

An estate is considered complex if the value of the estate exceeds £2.5 million, the tax due for the whole of the administration period exceeds £10,000, or the value of assets sold in any tax year for date of deaths up to April 2016 exceeds £250,000 (£500,000 for date of deaths after April 2016). Where an estate is not complex, personal representatives may make an informal payment of the total liability for the whole period of administering the deceased’s estate.

The project is being delivered through a number of phases and initially only lead trustees or personal representatives will be able to use the Trusts Registration Service. Agents will be able to register a new trust before October 2017. The ability to update a trust that has registered on the Trusts Register will also be introduced in the autumn.

26 April 2017, HM Revenue & Customs (HMRC) confirmed that 180 police officers were involved in raids on football clubs in the UK and in France, where it said authorities were assisting the UK investigation. HMRC is known to have been investigating the tax paid on multi-million pound transfers and image rights arrangements.

Tax officers are said to be investigating transfers in relation to a suspected £5 million income tax and National Insurance fraud. HMRC said: "Investigators have searched a number of premises in the North East and South East of England and arrested the men and also seized business records, financial records, computers and mobile phones."

3 April 2017, the Hong Kong SAR government signed competent authority agreements (CAAs) with Portugal and South Africa for conducting automatic exchange of financial account information in tax matters (AEOI),

In September 2014, Hong Kong indicated its support for implementing AEOI on a reciprocal basis with appropriate partners with a view to commencing the first exchanges by the end of 2018. In order to exchange, Hong Kong needs to have, or enter into, a double tax treaty or tax information exchange agreement that allows for AEOI, as well as to sign a CAA with that jurisdiction.

The signing of agreements with Portugal and South Africa brings the number of Hong Kong's AEOI partners to a total of 11, including Belgium, Canada, Guernsey, Italy, Japan, Korea, Mexico, the Netherlands and the UK.

The government also introduced the Inland Revenue (Amendment) (No. 3) Bill 2017 into the Legislative Council on 29 March. The Bill seeks to include Hong Kong's newly confirmed AEOI partners as well as prospective ones in the list of "reportable jurisdictions" under the Inland Revenue Ordinance.

24 April 2017, Italy gazetted Decree No. 50, which replaces the concept of “normal value” with a transfer pricing method that is in line with the OECD’s “arm’s length” principle and updates the list of qualifying intellectual property under the patent box regime.

Article 110 of the new corporate tax act enables tax authorities to make transfer pricing adjustments if the operations between related parties are not in line with conditions and prices that would have been made between the parties that are not related.

The new law also enables the Ministry of Finance to issue regulations to establish best practices in line with the international standards and allows corresponding adjustments to be made following a transfer pricing adjustment that results in a decrease in taxable income. Corresponding adjustments can be made at the request of a taxpayer if a transfer pricing adjustment involves a country with which Italy has an in-force tax treaty with adequate exchange of information provisions.

The list of intellectual property in the patent box regime will include: software protected by copyright; industrial patents; business, commercial, design models that are capable of legal of legal protection; and industrial and scientific information and know-how that is secret and capable of legal protection.

The new list will enter into force after 31 December 2016 for those taxpayers that have a fiscal year that corresponds to the calendar year; for others, it will enter into force in the first fiscal year starting after 31 December 2016.

28 April 2017, the governments of Japan and Russia announced they had agreed in principle on a new double tax treaty to replace the existing 1986 treaty between Japan and the former USSR. The treaty will be signed following completion of necessary procedure and will come into force after ratification by the parliaments of both countries.

The new treaty reinforces or introduces provisions for the purposes of clarifying the scope of taxation in the two countries, eliminating international double taxation and preventing tax evasion and avoidance, according to Japanese Foreign Ministry.

The 1986 treaty will continue to govern relations between Japan and other former USSR countries.

31 March 2017, the Ministry of Finance issued a public consultation on draft legislation that would introduce a beneficial ownership register (registratie uiteindelijk belanghebbenden) for Dutch companies.

Under the Fourth EU Anti-Money Laundering Directive (2015/849), EU member states must ensure that entities incorporated within their territory obtain and hold adequate, accurate and current information on their beneficial ownership, in addition to basic information, such as the company name, address, proof of incorporation and legal ownership. EU member states have to implement the Directive into their national laws by 26 June 2017.

Beneficial ownership is defined in the Directive as any natural person who ultimately owns or controls a corporate or legal entity or on whose behalf the entity is conducting its activity. In the case of corporate entities, it relates to a natural person who ultimately holds a shareholding or controlling interest or ownership interest of 25% or more.

Under the proposed legislation, which was subject to a four-week public consultation period, certain law enforcement authorities – including the Public Prosecution Service, the police, and the Tax and Financial Intelligence Unit – would have full access to the information on the register. Some information on the register will also be available to view by the public, although the draft law contains privacy safeguards for company owners who feel they may be put at risk.

6 April 2017, the OECD Inclusive Framework on BEPS released additional guidance to provide essential information that will give certainty to tax administrations and multi-national enterprise (MNE) groups on implementation of Country-by-Country (CbC) reporting. Countries are now implementing the standards provided by BEPS Action 13.

The additional guidance clarifies several interpretation issues related to the data to be included in a CbC report, as well as to the application of the model legislation contained in the Action 13 report, to assist jurisdictions with the introduction of consistent domestic rules.

Five specific issues are addressed: the definition of revenues; the accounting principles/standards for determining the existence of and membership in a group; the definition of total consolidated group revenue; the treatment of major shareholdings; and the definition of related party.

To further support the consistent implementation of the Common Reporting Standard (CRS), the OECD also released a series of additional CRS-related Frequently Asked Questions and the second edition of the Standard for Automatic Exchange of Financial Account Information in Tax Matters. The latter sets out additional technical guidance on the handling of corrections and cancellations within the CRS XML Schema. The other parts remain unchanged relative to the first edition that was issued in 2014.

21 April 2017, a Panamanian court granted bail to the two founders of Mossack Fonseca, the law firm at the centre of the “Panama Papers” leaks, in a separate case involving a corruption investigation in Brazil.

Jurgen Mossack and Ramon Fonseca each paid $500,000. They were arrested in February on suspicion of facilitating offshore accounts that allowed the Brazilian construction firm Odebrecht to channel bribes worth around $800 million across Latin America. The court found they were not a flight risk because they had been cooperating with the investigation.

31 March 2017, Singapore and Ghana on signed a double tax treaty that clarifies the taxing rights of both countries on all forms of income flows arising from cross-border business activities, and minimises the double taxation of such income. This will lower barriers to cross-border investment and boost trade and economic flows between the two countries.

The agreement provides that withholding taxes on dividends, interest and royalties will generally not exceed 7%. Withholding taxes on service fees will be capped at 10%. These rates will apply on or after 1 January following the year in which the treaty is ratified by both countries.

Singapore also signed a Protocol to amending its existing tax treaty with Latvia on 20 April. The Protocol lengthens the threshold period for determining the presence of a permanent establishment, and lowers the withholding tax rates for dividends, interest and royalties.

28 April 2017, a 54-year-old Swiss man was arrested in Frankfurt, Germany on suspicion of spying. He is accused of having spent five years spying for “a foreign power”, according to German federal prosecutors.

“The accused is strongly suspected of having worked for the secret service of a foreign power since the beginning of 2012,” a statement said. A judge at the German Federal High Court issued an arrest warrant last December. Several living and business quarters have been searched in Frankfurt and the surrounding area.

Unconfirmed reports say the suspect had been working for the Swiss intelligence service to identify German tax investigators involved in the purchase of confidential Swiss bank client data. Tax authorities in Germany have controversially bought information from whistleblowers in Swiss banks to determine if German residents with Swiss bank accounts have been evading tax.

5 April 2017, the Federal Supreme Court confirmed a 2015 court ruling that the Swiss government may not provide legal assistance to the French tax authorities in respect of two clients of a Swiss bank because the request was based on information had been obtained illegally

The case involved a married French couple whose bank account details were among those stolen by Herve Falciani, a former employee of HSBC in Switzerland. In 2014, Switzerland agreed to disclose financial details to France under the terms of the Franco-Swiss double tax treaty, but the unnamed couple challenged the decision. The Swiss Federal Administrative Court upheld their appeal in 2015.

The Supreme Court agreed. It concluded that the request could not be fulfilled if the information in question was obtained by means that are criminal under Swiss law. "The criminal origin of the Falciani data is undisputed," the court said, noting that Falciani was convicted by the Swiss Federal Criminal Court for his actions in 2015.

In a separate ruling last month, the Supreme Court made a legal distinction between data that had been stolen in Switzerland and that stolen abroad. It held that stolen UBS data could be passed to France because the theft had taken place in France and had not therefore breached Swiss law.

21 April 2017, the United Arab Emirates become the 109th jurisdiction to sign the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, which serves as the principal instrument for implementing the Standard for Automatic Exchange of Financial Account Information in Tax Matters developed by the OECD and G20 countries.

The Convention provides for all forms of administrative assistance in tax matters – exchange of information on request, spontaneous exchange, automatic exchange, tax examinations abroad, simultaneous tax examinations and assistance in tax collection. It will enable the UAE to fulfil its commitment to begin the first of such exchanges by 2018.

The Convention can also be used to implement the transparency measures of the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project such as the automatic exchange of Country-by-Country reports under Action 13 as well as the sharing of rulings under Action 5 of the BEPS Project.

6 April 2017, the England and Wales High Court (Family Division) made a £64 million financial remedy award to Pauline Chai, ex-wife of Malaysian businessman Khoo Kay Peng, on the basis of an equal sharing of the matrimonial assets after a 42-year marriage that produced five children.

In Chai v Peng & Ors [2017] EWHC 792 (Fam), the Malaysian husband and wife were married in 1970 in Malaysia. During the marriage the wife obtained Australian and Canadian citizenship after spending significant period of time living in those jurisdictions with the five children. The marriage broke down in 2012 and the wife initiated divorce proceedings in the UK in 2013.

Peng is the chairman of Malaysia United Industries, a global investment company. He also has interests in the Laura Ashley retail chain and owns ten hotels in Britain. He disputed that she had the necessary link to England to do so, and so issued his own petition in Malaysia.

For nearly two years, the parties fought over the correct jurisdiction for the case to be heard. Mr Justice Bodey, of the English High Court, ultimately ruled that England was the correct forum, a ruling later approved by the Court of Appeal. The court awarded her a time-limited maintenance settlement of £35,000 per month, plus some legal fees. The case was then adjourned pending a decision on final settlement.

The issues that now fell to be determined were the value, content and division of the assets. The wife sought an equal division of the total assets that she asserted were worth £205.8 million. The husband offered £15 million including £5.98 million that had already paid her by way of maintenance pending suit and legal services payment orders. He asserted that this should be a needs rather than a sharing case.

Bodey J held that in circumstances where the parties had been married for 42 years and they had five children together this was plainly a sharing case. It could not be disputed that the husband had been a hugely successful businessman but when that substantial contribution was pitched against the wife’s substantial contribution as a mother and homemaker, there could be no departure from equality based upon their respective contributions to the marriage.

The total assets amounted to just over £161 million. The husband’s interest in land in the UK, Canada and Australia would be transferred to the wife plus a lump sum of £40.6 million. There would be a deduction in respect of the amounts the wife had already received.

3 April 2017, the UK government said it wanted to work consensually with the Overseas Territories to establish publicly accessible registers of beneficial ownership of companies rather than on the basis of compulsion. Baroness Williams was responding to a proposed amendment to the Criminal Finances Bill in the House of Lords.

The amendment, moved by Baroness Stern, would have required offshore financial centres in British Overseas Territories to establish publicly accessible registers of beneficial ownership of companies no later than 31 December 2019.

Baroness Williams replied for the government: “The UK is the only G20 country to have established a public register, which has been in operation for less than a year. The government have made it very clear that it is the government’s long-term ambition that publicly accessible registers of beneficial ownership will in time become the global standard.

“Should this happen, we would expect the Overseas Territories and Crown Dependencies to implement this standard. Given that so many jurisdictions fail even to reach the standards set by the Financial Action Task Force for beneficial ownership transparency, it is right to focus our efforts on persuading others to up their game, while ensuring that the Overseas Territories, as well as the Crown Dependencies, deliver on what they have promised.”

The amendment was withdrawn, Baroness Williams saying that the government wanted to work consensually with the Overseas Territories rather than on the basis of compulsion.

25 April 2017, as a result of Prime Minister Theresa May’s surprise call for a snap General Election on 8 June, the government significantly reduced the Finance Bill 2017. Among the clauses removed were all the provisions effecting changes to the taxation of non-UK domiciled individuals and non-UK resident trusts, as well as the controversial plans to increase probate fees.

Known as the "wash-up", the process of curtailing the Finance Bill is common before General Elections. The dissolution of the current parliament on 3 May left an impossible timetable to pass the Finance Bill 2017, running at 762 pages, through to Royal Assent.

The legislative changes to the taxation of non-UK domiciled individuals and non-UK resident trusts were intended to be retrospective so the provisions are expected to be re-tabled when a new government is formed after the General Election, with Royal Assent given later in the year.

A new government may take a different view of the legislation, but both main parties generally supported the new rules. Whilst there may be some additional amendments, it is expected that the legislation will be introduced as intended and so will still take effect on 6 April 2017.

The Ministry of Justice also confirmed that the relevant statutory instrument – a form of legislation that allows a parliamentary act to be made or altered without a vote – for its controversial scheme to raise an additional £300 million a year on probate fees by charging up to £20,000 for large estates would not be completed before the election.

It will be up to the next government to decide whether to push through the plans, raising the possibility that the proposals could be dropped altogether.

6 April 2017, the UK government opened a consultation on its proposals for what is claimed to be the world’s first public register of the beneficial ownership of overseas companies owning property or engaging in central government procurement. The consultation was open to 15 May 2017.

The consultation paper said that UK property valued at over £180 million had been identified by investigators since 2004 as being the suspected proceeds of crime. Accordingly, the government anticipated that the introduction of the beneficial ownership register would assist law enforcement agencies to track down and recover proceeds of crime.

Margot James, Under Secretary of State at the Department for Business, Energy and Industrial Strategy (BEIS), said: “Our open economy benefits greatly from foreign companies looking to do business in Britain. We need to make sure the new requirements are workable and proportionate, such that the UK remains an attractive place for foreign investment. This call for evidence will help us test and refine our proposals to strike the right balance.”

The beneficial ownership register is intended to be similar to the “Persons with Significant Control” (PSC) company ownership register, which requires that all companies in England and Wales submit to Companies House a register of the people who can influence or control the company. It would include persons who have the right to exercise significant influence or control over a trust or firm that is not a legal entity.

Existing foreign property owners would have one year to declare their ownership to Companies House, which would hold the register and make it freely accessible to the public. Overseas entities planning to buy UK property would first have to register their beneficial ownership information with Companies House. The register would have to be updated every two years.

The register would contain the individual's name, year and month of birth, nationality, country of residence, a service address, the nature of their control over the company, and the date on which they gained that control.

It is proposed to provide for a more extensive regime than the PCS register for enabling individuals to apply for their information to be suppressed based on four criteria:

• The individual is at risk of violence or intimidation due to the activities of the entity, or the way the property is being used.
• Certain characteristics or attributes of that individual when associated with that entity or property could put them or someone who lives with them at risk of violence or intimidation.
• Publicly linking the property or entity to the individual will lead to an elevated public safety risk.
• Protection for minors or people with diminished capacity.

“We recognise that the introduction of this new register will be a significant change for overseas legal entities and how they interact with the UK property market and UK government procurement,” says the BEIS paper. “We will ensure that all legal entities affected by the changes are informed and made aware of the new requirements in good time. This will include working with international partners to raise awareness about the register with legal entities considering investing in the UK.”

3 April 2017, the US District Court in the Western District of Texas authorised the Internal Revenue Service (IRS) to serve a John Doe Summons on American Express Travel Related Services Company, seeking information about Dutch residents using American Express cards linked to non-Dutch bank accounts.

The US Department of Justice petitioned the court to authorise the summons at the request of the government of the Netherlands under the tax treaty between the Netherlands and the US, which permits the two countries to cooperate in exchanging information that is helpful in enforcing each country’s tax laws.

The IRS summons – referred to as “John Doe” summons because the IRS does not know the identity of the person being investigated – seeks the identities of Dutch residents who have debit or credit cards linked to bank accounts located outside of the Netherlands, such that the Dutch government can determine if those persons have complied with Dutch tax laws.

The Netherlands Tax and Customs Administration (NTCA) uses information on the use of payment cards issued by financial institutions outside of the Netherlands to identify non-compliant Dutch taxpayers. It has made similar requests, and already obtained similar information, from other financial institutions outside the US.

According to the petition, American Express informed the NTCA that the transaction information sought was exclusively available in the US. The filing does not allege that American Express violated any US or Dutch laws with respect to these accounts.