The Federal Administrative Court rejects the appeal of two Italian taxpayers and confirms that their bank details can be sent to the Italian tax authority. The Italian group request for administrative assistance in tax matters regarding so-called “recalcitrant Italian taxpayers” which are identified based on a behavioural model is admissible.
On 23 November 2018, the Agenzia delle Entrate, Ufficio Cooperazione Internazionale Italia (the Italian authority making the request) submitted a group request to the Federal Tax Administration (FTA) based on the double taxation agreement of 9 March 1976 between Switzerland and Italy (hereinafter: DTA CH-IT). In the request, it asked for bank details of Italian taxpayers it deemed to be “recalcitrant” based on the behavioural model in the mutual agreement of 27 February and 2 March 2017 between the two countries to be transmitted.
With its final decision dated 4 February 2020, the FTA approved the group request and granted Italy administrative assistance, specifically with regard to the two Italian taxpayers who appealed the decision to the Federal Administrative Court (FAC).
Appropriate behavioural model
In its judgment, the FAC finds that the Italian group request fulfils all formal and substantive requirements for admissibility stipulated in the DTA CH-IT, the associated additional protocol and the Swiss Tax Administrative Assistance Ordinance, interpreted in accordance with the mutual agreement. The request also meets the prerequisites established in the Federal Supreme Court’s case law on the prohibition of “fishing expeditions”. Specifically, the FAC states that the underlying behavioural model which qualifies the Italian taxpayers as recalcitrant fulfils the requirements for ruling out the possibility that the case at hand constitutes a “fishing expedition” on Italy’s part. Accordingly, the group request contains three essential elements. Firstly, it comprises a detailed description of the group based on a behavioural model. Secondly, it includes a clear reason for the assumption that there are Italian taxpayers who failed to meet their tax obligations. Thirdly, it explains how Italy is able to tax the natural persons in the group in question using the information requested. As both of the individuals involved fall under said behavioural pattern, the FAC rejects their appeal and confirms the granting of administrative assistance in their case.
This judgment may be appealed to the Federal Supreme Court within the restrictions of Art. 84a of the Swiss Federal Supreme Court Act of 17 June 2005, that is, if the legal question at stake is of fundamental importance or if the case is particularly significant for other reasons; a decision to be made by the Federal Supreme Court.