Switzerland’s federal court has ruled that even if individuals who are final beneficiaries have not received money from secret offshore trusts and numbered bank accounts, Swiss authorities can still share such confidential information with India — a stance that has dashed the hopes of many resident Indians who were counting on the court stopping or at least delaying the flow of data to the local income tax authority.

Lawyers hired by wealthy Indians have argued in Swiss courts that such personal financial information is irrelevant to the Indian tax authorities, which cannot tax beneficiaries without distributing funds from foreign trusts.

However, the Supreme Court has ruled in several rulings over the past two weeks that it will not rule on why Indian authorities have requested information and whether they can claim taxes on the basis of such data. According to the Supreme Court, Switzerland will share information if India requests it without assessing the ultimate relevance and end-use of the data.

The rulings affect foreign trusts in tax havens with multiple beneficiaries, some of which are linked to large Indian business houses.

“There has been a fundamental change in the attitude of authorities and courts, since at one point no data was shared in cases where requests were based on stolen data. Today, the curve, information sharing, and difficult

relies on the good faith of the requesting nation in information exchange procedures. Taxpayers must make the necessary arguments regarding the non-applicability of taxes to such structures in their home country,” said Ashish Mehta, partner at law firm Khaitan & Co.

A common structure used by wealthy Indian families to protect funds from the prying eyes of the IT department is “discretionary trusts”, where trustees have the discretion to allocate income, capital gains, or any amount of capital from the trust to the beneficiaries to distribute. Typically, such a trust holds shares in a company incorporated in the same or another tax haven and has accounts in a Swiss bank, while family members are named as beneficiaries of the trust.

Some of the tax appellate bodies in India have attempted to see through the veil separating the trust and the beneficiaries on the grounds that the latter controlled the trust indirectly by choosing trustees to appoint.

The rulings could limit the remedies available to Indians – or people of other nationalities with secret bank accounts and tax haven structures – who seek to prevent their respective governments from accessing wealth information.