Overview of tax law decisions of the Swiss Federal Administrative Court published between October 23 - 29, 2023:
- Judgment of October 3, 2023 (A-3032/2021): Withholding tax; capital contribution as of 2016 and 2017; The complainant reported the property inherited from a deceased shareholder as income in the 2012 financial statements. Subsequent to the Federal Supreme Court ruling 2C_1135 and 2C_1136/2016 of November 30, 2016, the complainant reclassified the income into an opening balance of reserves from capital contributions (KER). The FTA did not recognize that reclassification for tax purposes. In dispute and to be examined was whether the complainant owes withholding tax in the amount of CHF 378,000.00 on the gross dividend of CHF 1,080,000.00 or whether this is exempt from withholding tax as a repayment of capital contributions. There is disagreement on the question whether the complainant, as a result of the inheritance of its former shareholder (in 2012), had capital contributions repayable free of withholding tax pursuant to Art. 5 para. 1bis VStG as of December 31, 2016 (and thus also at the time of the distribution). The Federal Administrative Court determines the question whether, for the existence of a capital contribution, it is mandatory that it is shown by the complainant in a separate account in the commercial balance sheet. The interpretation shows that there are no valid reasons for the assumption that the clear wording does not reflect the true meaning of the standard. Therefore, the requirement that capital contributions be shown in a separate account in the commercial balance sheet is of constitutive importance for the exemption from withholding tax of the repayment of capital contributions. It then determines whether a capital contribution must be shown in a separate account in the commercial balance sheet at the time of payment by the holders of the participation rights, or whether a subsequent reclassification of a contribution recognized in profit or loss and shown in retained earnings is permissible under withholding tax law. The wording is not clear, but the interpretation shows that capital contributions received after January 1, 2011 must be shown in a separate account in the commercial balance sheet at the time of the payment or in a timely manner and a subsequent reclassification of a contribution recognized in profit or loss is not permissible (only permissible balance sheet adjustments are reserved). The requirement that the capital contribution be shown in a separate account in the commercial balance sheet cannot be recognized under withholding tax law. Therefore, as of December 31, 2016, the complainant does not have any reserves from capital contributions within the meaning of Art. 5 para. 1bis VStG, because it does not meet the requirement of showing the capital contribution in a separate account. Dismissal of the taxpayer's appeal.
- Judgment of 18 October 2023 (A-5555/2022): Sales levy 2005-2016 (interest); in the present case, the only question in dispute and to be examined is whether the complainant is owed compensation interest for the period between the payment of the presumably owed sales levy of CHF 16,000,000 on April 28, 2016 until the (wrongly issued) invoicing of the lower instance on July 17, 2017 for an amount of CHF 25,895,840.99. In particular, it is undisputed that the levy was unjustified and that interest on remuneration is owed for the period between the invoicing on 17 July 2017 and the reimbursement of the unjustly levied amount in July 2018. Neither the StG nor the StV provide for a compensation interest. According to the case law, a refund interest is nevertheless owed by way of exception if the turnover tax has been wrongly levied by the FTA by means of an order or invoice and the tax debtor is forced to pay with reservation in order to avoid the statutory default interest and legal remedies are taken at the same time. If the complainant had wanted to minimize the risk of interest on arrears and to secure a claim to possible interest on remuneration, it would have had to request a contestable ruling regarding the turnover levy from the lower court. Only with the invoice of 17 July 2017 did the FTA (wrongly) levy the turnover tax in casu, so that interest on remuneration is also only owed from this date. The appeal is dismissed.
Administrative assistance (incl. updates/re-publications):
- A-3358/2021: Administrative assistance (DTA CH-US); decision confirmed by BGer in judgment of September 27, 2023 (2C_270/2022)
- A-2121/2020: Withholding tax (refund). Decision appealed to the Federal Supreme Court.
- A-1446/2023: Radio and television fees; household tax. Decision appealed to the Federal Supreme Court.
Decisions are listed chronologically by publication date.