Restitution in national circumstances - current practice and state of affairs regarding Art. 23 VStG

Case 1: Refund of withholding tax in case of originally undeclared dividends

Mr X is subject to unlimited tax liability in Canton Z. In the securities list of his 2015 tax return, he declared his shareholding in X AG with a tax value of CHF 1 million, but - in contrast to previous years - did not list the dividend of CHF 50,000 flowing from it (due on 15 May 2015).

Mr. X is the sole shareholder and a member of the executive body of X AG with sole signing authority. X AG waives the implementation of the notification procedure in each case due to the administrative expense. As in previous years, Mr. X, in his capacity as a body of X AG, has therefore correctly declared the dividend paid as of 15 May 2015 to the FTA on Form 103 and has paid and passed on the withholding tax.

With the assessment ruling of 16 August 2016, the tax administration of Canton Z calculated this income on the basis of its own investigations and noted that Mr. X admittedly "erroneously" did not declare the dividend. However, in the absence of a proper declaration of the income values, the right to a refund of the withholding tax would no longer apply. The Cantonal Tax Administration Z maintained this view in its objection decision of 2 February 2017.

Before the cantonal appellate court, Mr. X applied not only for a refund of the withholding tax but also for the suspension of the proceedings, since the partial revision of the Federal Law of 13 October 1965 on Withholding Tax (VStG; SR 642.21), which is currently under parliamentary discussion, would in all probability also have an impact on the facts of the case. The instructing judge of the Appeals Court approved the application for suspension as of 15 April 2017. After the provision of Art. 23 VStG was amended with effect from 1 January 2019, the instructing judge lifted the suspension of the present proceedings on 1 March 2019.

Questions

1. What are the general conditions for the refund of withholding tax for domestic natural persons?
2. Are these conditions fulfilled in the present case? In particular:

• Did Mr X make a proper declaration?
• Does Article 23(2) of the VStG apply in this case in terms of time and subject matter?

Case 2: Case study: Refund of withholding tax in case of originally undeclared dividend

Mr Reich is subject to unlimited tax liability in Canton B. In the securities list of his 2015 tax return, he declares, among other things, 10,000 registered shares in X AG, domiciled in Zurich. Mr Reich lists this shareholding in his list of securities with a tax value of CHF 10,000,000, but does not list the gross dividend of CHF 1,100,000 that became due in this tax period. A withholding tax of 35 percent was deducted from this dividend, resulting in a net dividend of CHF 715,000.

In an assessment ruling dated 5 June 2017, the tax administration of Canton B offset the gross dividend of CHF 1,100,000. In addition, it informed Mr Reich that the claim for a refund of the withholding tax of CHF 385,000 had been forfeited due to the lack of a proper declaration. Mr Reich appealed against this unsuccessfully. The Cantonal Tax Appeals Commission also dismissed Mr Reich's appeal in application of the then applicable Art. 23 VStG without further clarification of the facts in its ruling of 1 May 2018.

On 30 May 2018, Mr Reich applied to the Federal Supreme Court to stay the proceedings. The instruction judge granted this request as of 15 July 2018, and the stay was lifted again on 1 February 2019. In the matter before the Federal Supreme Court, Mr Reich requested that the withholding tax on the 2015 dividend of X AG in the amount of CHF 385,000 be refunded to him.

questions:

1. Have all the conditions for the refund of withholding tax been met?
2. How could the Federal Supreme Court assess the facts of the case?

Case 3: Refund of the withholding tax on benefits in kind not originally declared

Muster AG is wholly owned by Mr. Muster, with unlimited tax liability in Canton B. During 2018, the FTA will carry out an audit of Muster AG for withholding tax and stamp duties for the years 2013 to 2017. The following benefits in kind result according to the final account of the FTA of 10 February 2019:

• "Securities." Model AG held a portfolio of securities. The sole shareholder will make a "private withdrawal" in 2013 by transferring securities with a value of CHF 70,000 from the securities portfolio of Muster AG to a securities portfolio of the sole shareholder. Subsequently, Muster AG will write off the corresponding securities in full. The withholding tax amounts to CHF 24,500 in the event of a subsequent transfer to Mr. Muster
  .
• "Gold bullion": Muster AG holds gold in the amount of CHF 300,000 in a bank safe in its name. In 2014, the sole shareholder makes a "private withdrawal" by physically removing the gold from the safe and depositing it in his private safe. Subsequently, Muster AG writes off the corresponding amount in its accounts. The withholding tax amounts to CHF 105,000 in the event of a subsequent pass-through to Mr Muster.
• "Own shares": Muster AG holds own shares that have not yet been amortised for tax purposes (cf. Art. 4a VStG). In January 2017, the sole shareholder purchases seven of these shares from Muster AG at the tax value as of the end of 2016 of CHF 120,000.00 per share, which has just been notified by the cantonal tax administration, with a net asset value as of 31 December 2016 of CHF 350,000.00 per share, which is why the difference between the "net asset value as fair market value, less lower net asset tax value" is a payment in kind totalling CHF 1,610,000. In the event of a subsequent transfer, the withholding tax amounts to CHF 563,500.

On the basis of the notification of these three benefits in kind by the FTA to the cantonal tax administration responsible for Mr. Muster, the latter clarified whether Mr. Muster had already declared the relevant income for direct tax purposes. Since this was not the case, the cantonal tax office initiated corresponding post-tax proceedings against Mr. Muster.

questions:

1. Have all the conditions for the refund of withholding tax been met?
2. Does Article 23(2) of the VStG apply in this case in terms of time and subject matter?