Workshop by Markus Küpfer at the ISIS) seminar on October 21, 2024 entitled "Reporting procedures in group relationships, reimbursement in national relationships - current practice and decisions"
Note: This language version is an automatically generated translation. The text may therefore contain linguistic and terminological errors.
view in original language (German)Produktions AG is a company subject to unlimited tax liability in Switzerland. Within the global Bitterballen Group, it is responsible for the production of high-protein foods. Produktions AG is wholly owned by Beteiligungen AG, which is also subject to unlimited tax liability in Switzerland. Beteiligungen AG functions as a country holding company. Beteiligungen AG is in turn wholly owned by the Dutch company Bitterballen B.V., which is the top holding company of the Bitterballen Group.
An audit conducted by the Federal Tax Administration (FTA) regarding withholding tax and stamp duties in 2021 revealed that Produktions AG reported payroll expenses for an individual (Ms. Global) in its books, even though she did not work for Produktions AG at all, but rather for numerous other group companies within the Bitterballen Group, all of which were based outside Switzerland. The FTA estimated (in the absence of precise information from Produktions AG) the corresponding payroll expenses of Produktions AG for Ms. Global for the years 2016 through 2020 at a total of CHF 500,000. The FTA considered this to constitute monetary benefits provided by Produktions AG to the benefit of those group companies for which Ms. Global worked. This monetary benefit resulted in a withholding tax liability of CHF 175,000 (amounting to 35% of CHF 500,000).
Since Produktions AG wished to avoid the effort of allocating the individual tax claims to the various companies within the group that actually benefited from the services in connection with this monetary benefit, it calculated the withholding tax claimed by the FTA on a pro rata basis and transferred the amount of CHF 269,231.—. It also paid the late payment interest subsequently billed to Produktions AG by the FTA without reservation.
In 2023, following a renewed review of the facts examined by the FTA in 2021, Produktions AG concluded that the withholding tax it had declared and subsequently paid as of November 30, 2021, could have been settled through the reporting procedure. Ultimately, the Dutch company Bitterballen B.V. was the actual beneficiary in each case. Due to this circumstance, the withholding tax paid in 2021 was no longer owed retroactively, and the FTA was required to refund Produktions AG the “erroneously” paid withholding tax in the amount of CHF 269,231, together with the default interest paid and interest on the refund from the date the tax claim was transferred to the FTA, must be refunded. Should the FTA, contrary to expectations, insist on its withholding tax claim, Produktions AG further disputes the amount of the monetary consideration, which in fact was significantly lower than the CHF 500,000 billed by the FTA. However, Produktions AG did not submit any documents that could confirm this fact. Produktions AG thus filed a request for the notification procedure to be carried out and, in the event that its request was not granted, asked the FTA to issue a contestable decision. The FTA subsequently issued a formal decision in which it fully confirmed the monetary benefit of CHF 500,000. Produktions AG filed an objection against this decision.
Prior to issuing the decision on the objection, the FTA gave Produktions AG the opportunity to substantiate the amount of the monetary benefit. Produktions AG subsequently submitted only incomplete relevant records. Consequently, the FTA directly—that is, without first notifying Produktions AG—included statements of account that it had obtained in 2022 during administrative criminal proceedings against Produktions AG as part of an interrogation of a company officer acting as an informant. These statements show that Produktions AG’s expenses for the salary payments at issue here for the years 2016 through 2020 actually amounted to CHF 510,000.
Ms. A is a resident of Canton Z and is subject to unlimited tax liability there. Ms. A is the daughter and sole heir of Ms. B (also a resident of Canton Z), who passed away on October 2, 2021. After inheriting the estate, Ms. A discovered that the decedent had failed to report domestic SMI shares valued at approximately CHF 3,000,000, as well as the resulting income, amounting to approximately CHF 70,000 to CHF 100,000 per year, in her relevant tax returns.
Ms. A’s legal representative therefore filed a voluntary disclosure in inheritance cases in the spring of 2022 for the tax periods 2018, 2019, and 2020, which is why the relevant assets and income therefrom were properly taxed for income and wealth tax purposes for the tax periods 2018, 2019, and 2020 in a back-tax procedure.
As part of the voluntary disclosure, Ms. A’s legal representative also requested a refund of the withholding tax deducted from the subsequently reported investment income as follows:
In a formal decision in the fall of 2022, the Cantonal Tax Administration Z rejected the requested refund because the decedent (Ms. B) had apparently failed to declare the subsequently reported assets and investment income, at least with conditional intent, and thus no proper declaration within the meaning of Art. 23 VStG existed.
Ms. Y resides in Canton B and is subject to unlimited tax liability there. She is the owner of all shares in X AG, which has its registered office and actual management in Canton A. The purpose of X AG is to provide financial services of all kinds and to hold equity interests. Ms. Y is also the owner of all ordinary shares in Y GmbH, which offers consulting services in the real estate sector. Y GmbH has its registered office and actual management in Canton B. It is therefore—like Ms. Y—fully taxable in Canton B.
As of the end of March 2020, Ms. Y sold all ordinary shares of Y GmbH to X AG for a price of CHF 150,000. In her 2018 and 2019 tax returns, Ms. Y declared her interest in Y GmbH at CHF 1 each in her securities portfolio.
During the 2020 tax assessment of X AG by the tax office of Canton A, the office deemed the purchase price of the Y GmbH shares by X AG—CHF 150,000—to be inconsistent with the arm’s length principle. It set the tax-relevant value of this holding at CHF 1, which is why the contribution of Y GmbH’s ordinary shares at the X AG level in the amount of CHF 149,999 constituted the contribution of a non-value. In the opinion of the Tax Office of Canton A, this non-valuable asset constitutes a monetary benefit provided by X AG to its shareholder, Ms. Y.
Initially, X AG, or rather its sole shareholder, Ms. Y, disagreed with this classification by the Tax Office of Canton A and filed an objection against the assessment (income and capital taxes). However, the corresponding decision on the objection by the Tax Office of Canton A, which fully confirmed the existence of the monetary benefit of CHF 149,999, became final and uncontested on November 15, 2021. Ms. Y did not file her personal tax return for the 2020 tax period until November 30, 2021, without, however, declaring the monetary benefit from X AG.
For its part, X AG—in response to a request from the FTA—declared the hidden profit distribution as a monetary benefit for withholding tax purposes on July 22, 2022, using Form 102, and paid the tax due thereon in the amount of CHF 52,500 (plus interest on arrears). In addition, it passed the tax on to Ms. Y as of the end of August 2022.
On September 1, 2022, Ms. Y retroactively declared the monetary benefit of CHF 149,999 to the cantonal tax administration B for the 2020 tax period. In this context, she also claimed a refund of the withholding tax in the amount of CHF 52,500.
