Criminal law aspects of the withholding tax

Cédric Hofer

Martin Jau

Case 1: Vehicle costs (business/private vehicle)

1. facts of the case

‍Mr.A works as an asset manager for wealthy private clients and is employed by Super-Finanz AG, which he owns and which is doing well. In 2016, Super-Finanz AG purchased a Bentley Continental for CHF 270,000.00 (incl. VAT of 8 %) for client visits. Mr. A also uses the vehicle for private trips. However, he does not keep a logbook. For the private journeys, Super-Finanz AG debits him annually with a private share of CHF 20,000.00 on his current account.

Super-Finanz AG has additionally leased a Porsche Cayenne, new price CHF 150,000.00, as of July 1, 2017. The leasing installments amount to CHF 5,000.00 per month (24 monthly installments). The remaining costs (insurance, maintenance and repairs as well as fuel) were paid privately. The final payment to take over the vehicle of CHF 43,000.00 was paid and capitalized by Super-Finanz AG at the end of the leasing period at the end of June 2019. The Porsche is used exclusively by Mr. A's wife and only for private journeys. Mr. A divorced at the end of 2020. His wife has kept the Porsche. At Super-Finanz AG, the capitalized redemption sum was not derecognized, but continued to be depreciated annually.

In the course of a VAT audit in 2023, the facts were uncovered. Mr. A subsequently contacted the tax advisor X.

Questions

‍ - Is there a need for action with regard to withholding tax?

- If so, what and based on what?

- How does the FTA determine the imputed income?

- When does the VSt claim arise?

- Limitation according to Art. 17 or/and subsequent payment according to Art. 12 VStrR?

- Tax liability and pass-through?

- Refund possible?

- Reporting procedure possible?

- Aspects of Administrative Criminal Law: Has Mr. A or his wife committed an offense under the VStrR? Was Mr. A guilty of intent or negligence?

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Case 2: Intra-group lending

1. facts of the case

‍Mr.B holds Immobilien AG, which has massive profit reserves. At the end of 2017, he founds the new Bekleidungs GmbH with a share capital of CHF 20,000.00. However, the Bekleidungs GmbH does not develop as desired. In the first financial statement as of 31.12.2018, it shows a loss of CHF 80,000.00. Since the banks did not want to grant loans due to the high risk of default, Immobilien AG granted Bekleidungs GmbH an unsecured loan totaling CHF 1,000,000.00 in several tranches during 2019 to build up its business activities. The loan agreement is signed by Mr. B as the sole director of Immobilien AG and managing director of Bekleidungs GmbH. Bekleidungs GmbH generates massive losses in 2019 and 2020, not least due to the pandemic.

The loan of Immobilien AG has already been treated as hidden equity for the capital taxes of Bekleidungs GmbH since 2019. At the beginning of 2021, Mr. B establishes Holding AG and contributes Immobilien AG at nominal value and Bekleidungs GmbH at CHF 1.00 by means of a contribution in kind against the issue of the holding shares.

In the course of 2021, Holding AG takes over the loan from Immobilien AG to Bekleidungs GmbH against bank transfer at the nominal amount including accrued interest. In 2022, Bekleidungs GmbH goes bankrupt and Holding AG writes off the loan in full. The cantonal tax administration offsets the write-off and submits a report to the FTA regarding withholding tax.$

Questions

‍- What are the consequences of withholding tax, is there a need for action regarding withholding tax?

- VSt survey?

- When does the tax claim arise?

- Who is the beneficiary of benefits?

- Must any interest on arrears also be passed on to the beneficiary of the benefit on the basis of Art. 14 (1) VStG?

- Can the registration procedure be requested?

- Who is entitled to reimbursement?

- Does the acquisition of the loan in 2019 by the holding company also trigger VSt or another tax?

- Are there any consequences under administrative criminal law?

- If so, is there intent or negligence?

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Case 3: Late reporting instead of payment of withholding tax in a group relationship

1. facts of the case

‍Atthe Annual General Meeting of Subsidiary AG on June 1, 2019, a dividend of CHF 200,000.00 due August 1 to the parent company will be approved. The CFO of the subsidiary AG is on vacation for 3 weeks in August. After his return, he does not think about declaring the withholding tax with forms 103 and 106. Only at the end of October, during the preparation of the quarterly financial statements, he realizes the mistake and sends the forms to the FTA as of October 30, 20219.

Questions

‍- What are the consequences for withholding tax?

- What are the administrative penal consequences of late reporting?

- Are there any other considerations in connection with the question of whether VAT should be paid late or reported?

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Case 4: Unrecorded income at an AG (black account)

1. facts of the case

‍Sincethe beginning of 2016, Tu-nicht-gut AG has been sending payment slips for selected customers with their invoices to a bank account that is in the company's name but does not appear in the accounts.

The sole shareholder D collects CHF 5,000.00 in cash every month and uses it to finance his dissolute lifestyle.

In the years 2016 to 2021, the receipts on the bank account amount to CHF 70,000.00 annually and the withdrawals amount to CHF 60,000.00 annually. At the end of 2021, the balance on the bank account amounts to CHF 60,000.00.

The FTA comes across the invoices of Tu-nicht-gut AG during a VAT inspection at a customer's premises and becomes suspicious due to the design of the invoices (old letterhead, outdated telephone numbers, incorrect VAT rate). At the beginning of December 2022, she registers for an inspection at Tu-nicht-gut AG for February 2023. Mr. D turns to his unsuspecting trustee and confesses the situation to him. On the advice of his trustee, Mr. D files a voluntary disclosure for the profit and income taxes with the competent cantonal tax authorities as of the end of December 2022 and supports them unconditionally in determining the subsequent taxes. The tax claims are paid in installments. Self-disclosures for value added tax and withholding tax are also submitted to the Federal Tax Administration.