Update on withholding tax and stamp duties

Markus Küpfer

Thomas Jaussi

Case 1: Refund of withholding tax; tax avoidance

1. facts of the case

F AG was founded in 2002 and is domiciled in canton A. Its purpose is to carry out fiduciary and accounting work and to hold and manage participations in companies in the industrial, financial and real estate sectors. Its fully paid-up share capital amounts to CHF 250,000. All participation rights of F AG were held by the domestic A Holding AG in 2005.

At the end of 2004, F AG held all participation rights in three trust companies. Between 2005 and 2010, it also held participation rights in four other trust companies.

C Consulting AG is also a company based in Switzerland. Its corporate purpose includes the performance of fiduciary and accounting services. C Consulting AG has a share capital of CHF 100,000, which is divided into 100 shares with a fully paid-up nominal value of CHF 1,000.

By contract dated 23 March 2005, Mr C, who is resident in Paraguay, sold to F AG all participation rights in C Consulting AG for a price of CHF3,100,000. F AG thus continued its business strategy of acquiring trust companies. As of 31 December 2004, C Consulting AG had current assets of CHF900,000 in the form of cash and cash equivalents only, according to its balance sheet. The fully operational fixed assets amount to CHF 600,000. On the liabilities side, CHF 632,000 in outside capital was booked. The equity capital of C Consulting AG amounts to CHF 868,000, which includes the share capital, general reserves of CHF 600,000 and the profit carried forward of CHF 168,000.

The course of business of C Consulting AG in the years 2005 to 2010 did not allow it to generate profits; rather, annual losses of between CHF 1,000 and CHF 5,000 resulted in each case. Therefore, C Consulting AG did not distribute any dividends for the financial years 2005 to 2009.

On 26 July 2011, C Consulting AG declared a gross dividend distribution of CHF 500,000 to the Swiss Federal Tax Administration (FTA) using form 103. This dividend related to the 2010 financial year of the company and was approved by the general meeting of C Consulting AG on 10 July 2011 (without specifying a due date). C Consulting AG transferred an amount of CHF 175,000 to the FTA as at 30 July 2011 (representing 35% of CHF 500,000).

On 12 October 2012, F AG applied to the FTA for a refund of the withholding tax of CHF 175,000 on the dividend of C Consulting AG using form 25.

Question

Will the FTA approve F AG's application for a refund of withholding tax using form 25 in the amount of CHF 175,000?

Case 2: Turnover tax in a group relationship - mediation

1. facts of the case

The Swiss Group has the following structure:

The following benchmarks are known:

SwissHoldCo is a domestic securities dealer pursuant to Art. 13 para. 3 let. d StG.
SwissFinanzCo is a domestic securities dealer pursuant to Art. 13 para. 3 let. d StG.
SwissManagCo is not a domestic securities dealer.
C management is employed by SwissHoldCo.
The Group M&A department, Legal and Tax are employed in SwissManagCo.
USOpsCo has an independent M&A department that makes acquisitions on its own.

The following shareholding transactions are carried out:

Planned transaction 1:

D-OpCo buys an international group held by D-HoldCo for CHF 1'000'000.
D-HoldCo and the German OpCo will be held by D-OpCo after the transaction.
The other, i.e. non-German OpCo of the acquired group will be transferred to the respective national companies of the Swiss group.
The purchase price financing for the acquisition of D-HoldCo is organised by SwissFinanzCo.
The negotiations will be led by the CEO and CFO of Swiss Group, who will also sign the Share Purchase Agreement on behalf of SwissHoldCo.
The necessary acquisition actions are taken by SwissManagCo

Question

On which transactions and from which company or companies is turnover tax due?

Planned transaction 2:

US-OpCo buys an international group held by US-HoldCo for CHF 1'000'000.
US HoldCo and the US OpCo of the new group will be held by US OpCo after transaction
The other OpCo of the acquired group will be reassigned to the respective country companies of the Swiss group.
The purchase price financing is organised by SwissFinanzCo.
The necessary acquisition actions will be taken by the M&A department of US-OpCo.
The negotiations will be led by the CEO and CFO of US-OpCo, who will also sign the Share Purchase Agreement on behalf of US-OpCo.
The Board of Directors of SwissHoldCo has signed the LOI and approved the SPA.

Question

On which transactions and from which company or companies is turnover tax due?

Planned transaction 3:

Like transaction 1.
The negotiations will be conducted by the CEO and CFO of D-OpCo, who will also sign the SPA on behalf of D-OpCo under a power of attorney.
The necessary acquisition actions are taken by SwissManagCo.
The purchase price financing is organised by SwissFinanzCo.
The Board of Directors of SwissHoldCo has signed the LOI and approved the SPA.

Question

On which transactions and from which company or companies is turnover tax due?

Case 3: Own participation rights

1. facts of the case

Swissco is a public limited company under Swiss law with a share capital of CHF 1'000'000, divided into 1'000 registered shares with restricted transferability of CHF 1'000 each. All shareholders of Swissco are domestic natural persons. Three shareholders each hold 20 percent of Swissco's share capital. The remaining 40 percent are held by around 15 shareholders (the "small shareholders").

Over a period of about three years, Swissco will buy back the shares of the small shareholders. The goal is for the three major shareholders to acquire the 40 per cent of shares from Swissco on a pro rata basis after the buybacks have been completed and thus to hold Swissco in full, one third each.

The repurchase prices vary between CHF 1'000 and CHF 1'500 per share, depending on the shareholder. It can be assumed that the fair value per share will be around CHF 1'250 during the entire transaction period.