Monetary benefits from the perspective of withholding tax

Case 1: Guarantee of a loan by grandparent company 

1. facts of the case

X. AG receives from a bank a loan of CHF 10 million with an interest rate of 10% p.a. This loan is guaranteed by Z. Sàrl, the Luxembourg-based grandparent company of X. AG, which holds it via Y. AG). (Otherwise, X. AG has no outside capital). According to KS 6/97, the debt capacity of X. AG amounts to only CHF 6 million. 

Questions

• Is there a pecuniary benefit subject to withholding tax?
• If yes: who is the beneficiary (and thus entitled to a refund of withholding tax)?

2. variant 1

How would the case be assessed if the loan was guaranteed by both Z. Sàrl and Y. AG would be guaranteed? 

3. variant ^1to

How would the case be assessed if the loan was guaranteed by both Z. Sàrl and Z. plc, the UK-based parent of Z. Sàrl? 

4. variant ^1ter

How would the case be assessed if the loan was guaranteed by both Z. Sàrl and its Swiss-based subsidiary B. AG (a sister of Y. AG)? 

5. variant 2

How would the initial case be assessed if the debt capacity still amounted to CHF 8 million on 31.12.2021 and was still CHF 4 million on 31.12.2022? (Interest due date: 30.6.) (Variant: debt capacity 31.12.2021 of CHF 4 million and CHF 8 million as of 31.12.2022) 

6. variant 3

How would the case be assessed if the loan was not guaranteed by Z. Sàrl until three years after the loan was granted (because X. AG no longer complies with the financial covenants in the loan agreement at that time and the bank thus insists on additional security)? 

7. variant 4

How would the case be assessed if the loan was guaranteed neither by Z. Sàrl nor by Y. AG, but Y. AG granted a pledge over the shares X. AG in favor of the bank? 

8. variant 5

How would the case be assessed if the bank were to grant X.AG only a loan (granted by Z. Sàrl) in the amount of CHF 5 million (interest: 10% p.a.). A further CHF 3 million would be granted to X. AG would receive from its parent company Y. AG and CHF 2 million from Z. Sàrl (interest rate: 10% p.a.). 

Case 2: Non-interest-bearing loan to subsidiary 

1. facts of the case

The domestic X. AG grants its domestic or foreign subsidiary an interest-free loan of USD 100 million. 

Questions

• What are the consequences regarding withholding tax and stamp duties?
• Does it make a difference if X. AG finances the loan from a third-party loan bearing interest at 10% p.a.?

Case 3: Monetary benefit from foreign great-granddaughter 

1. facts of the case

The domestic X. AG holds a BVI company (BVICo) via its domestic granddaughter Z. AG. BVICo is the owner of a yacht, which it makes available to X. (the Monaco-based sole owner of X. AG) free of charge. 

Question

• Withholding tax assessment?

Case 4: Time of accrual of the withholding tax claim 

1. facts of the case

The FTA provides X. AG (financial year = calendar year) in a letter dated 30.3.2023 for the financial year 2020 (annual financial statements approved at the AGM held on 15.8.2021) the following monetary benefits to its sole shareholder X.:

• CHF 150,000 for a commission received directly from X., which was actually due to X. AG was entitled to.
• CHF 100,000 for the sale of an asset to X. (commitment transaction 30.7.2020; disposal transaction 30.9.2020)
• CHF 20,000 Excessive interest on a shareholder loan (interest due date: 30.6.), of which CHF 10,000 is due to the excessive interest rate and CHF 10,000 is due to hidden equity.
• CHF 30,000 for the too low rent of an apartment used privately by the shareholder.
• CHF 15,000 for various hotel nights charged to X. AG in the months of April, July and September.

Questions

• From when does the interest on arrears for withholding tax start? 
• To what extent can X. AG still make corrections for the 2021 financial year with regard to the rent and the interest on the loan (AGM has not yet taken place)? 

Case 5: Consideration of hidden reserves and original goodwill when calculating hidden equity 

1. facts of the case

X AG buys the domestic company Y AG from an independent third party at a price of CHF 40 million. Y AG has an asset value of CHF 10 million. Taking into account the commercial balance sheet as of January 1, 2023 and the requirements under KS 6 Hidden Equity, Y AG can take out loans from X AG or related parties in the amount of CHF 8 million. The company claims that 1) hidden reserves on immovable assets of CHF 10 million, 2) hidden reserves on the unrecognized customer base of CHF 10 million and 3) original goodwill of CHF 10 million (in the remaining difference to fair value) exist. 

Questions

• Withholding tax assessment? 
• Solution approaches outside of KS 6 Hidden equity? 

Case 6: Parent absorption with compensation payments 

1. facts of the case

The domestic X AG (AK: CHF 100,000) is 100% held by the domestic Y AG; Y AG (AK: CHF 200,000) is held by the natural person A resident abroad. The balance sheet of Y AG shows the following items: 

X AG absorbs its parent company Y AG; due to the loss in nominal value, A receives a compensation payment of CHF 100,000. 

Question

• Withholding tax assessment?

2. variant 1

How would the case be assessed if the share capital of X AG is CHF 200,000 and that of Y AG is CHF 100,000? 

Question

• Withholding tax assessment?

3. variant 2

How would the case be assessed if the share capital of X AG amounts to CHF 100,000, that of Y AG amounts to CHF 100,000 and X AG also has confirmed CERs of CHF 100,000? 

Question

• Withholding tax assessment?

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