Update on withholding tax and stamp duties (2025)

Case 1: Reporting procedure vs. payment of withholding tax

1. facts of the case

Produktions AG is a company with unlimited tax liability in Switzerland. Within the global Bitterballen Group, it is responsible for the production of foodstuffs with a high protein content. Produktions AG is wholly owned by Beteiligungen AG, which also has unlimited tax liability in Switzerland. Beteiligungen AG has the function of a country holding company. Beteiligungen AG is in turn held by the Dutch company Bitterballen B.V., which is the top holding company of the Bitterballen Group.

An audit by the Swiss Federal Tax Administration (FTA) for withholding tax and stamp duty purposes in 2021 revealed that Produktions AG reported salary expenses for one person (Ms. Global) in its books for the financial years 2016 to 2020, although she did not actually work for Produktions AG, but 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 salary expenses of Produktions AG for Ms. Global for the years 2016 to 2020 at a total of CHF 500,000. The FTA considered this to be non-cash benefits by Produktions AG for the benefit of the group companies for which Ms. Global worked. This pecuniary benefit led to a withholding tax claim of CHF 175,000 (35% of CHF 500,000).

As Produktions AG wanted to save itself the trouble of separating the individual tax claims for the various companies within the group that actually received the benefit in connection with this non-cash benefit, it added the withholding tax claimed by the FTA to one hundred and transferred the amount of CHF 269,231 to the FTA without reservation as at November 30, 2021. Production AG also paid the default interest subsequently charged by the FTA without reservation.

In 2023, Produktions AG came to the conclusion, based on a renewed review of the facts taken up by the FTA in 2021, that the withholding tax declared by it and subsequently paid as of November 30, 2021 could have been settled in the notification procedure. The ultimate beneficiary is the Dutch Bitterballen B.V. Due to this circumstance, the withholding tax paid in 2021 is no longer owed retroactively and the FTA must refund to Produktions AG the "erroneously" paid withholding tax in the amount of CHF 269,231, in addition to the interest on arrears paid and interest on remuneration from the transfer of the tax claim to the FTA. If, contrary to expectations, the FTA were to uphold its withholding tax claim, Produktions AG would also dispute the amount of the pecuniary benefit, which was in fact significantly lower than the CHF 500,000 invoiced by the FTA. However, Produktions AG did not submit any documents that could confirm this fact. Produktions AG thus submitted an application to carry out the notification procedure and requested the FTA to issue a contestable ruling in the event that its application was not granted. The FTA then issued a formal ruling in which it confirmed the pecuniary benefit of CHF 500,000 in full. Produktions AG lodged an objection against this.

Prior to issuing the objection decision, the FTA gave Produktions AG the opportunity to prove the amount of the monetary benefit. In response, Produktions AG submitted only incomplete records. For example, the FTA directly - i.e. without informing Produktions AG in advance - included statements that it received in 2022 as part of administrative criminal proceedings against Produktions AG in the context of an interrogation of an executive body of the company as a person providing information. These statements show that the expenses of Produktions AG for the salary payments in question for the years 2016 to 2020 actually amounted to CHF 510,000.

Questions

• Is it lawful to refer to the files from the administrative criminal proceedings for the present substantive tax proceedings? Are there any other procedural aspects to consider?
• Did the FTA correctly qualify the salary expenses of Produktions AG as benefits in kind in the present case? If so, is a reporting procedure permissible?

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Case 2: bonus shares

1. facts of the case

Muster Holding AG is currently a domestic stock corporation with a share capital of CHF 10,000,000, divided into 10,000,000 shares of CHF 1 each. As TopCo, Muster AG controls the Muster Group of around 20 operating domestic and foreign subsidiaries. One operating company is the domestic Muster Management AG, which exclusively provides services to the operating companies.

Muster Holding AG is held by various shareholders. All shareholders are domestic legal entities with a capital share of at least ten percent. The following applies:

• The shareholder CEO Holding AG, a domestic company, is held by CEO as part of his private assets. CEO, a domestic natural person, is the managing director of the Muster Group and has an employment contract with Muster Management AG.
• The shareholder CFO Holding AG, a domestic company, is held by CFO as part of his private assets. CFO, a domestic natural person, is the CFO of the Muster Group and has an employment contract with Muster Management AG.

Based on an existing shareholders' agreement, the CEO and CFO are each entitled to acquire 300,000 shares in Muster AG at a nominal value of CHF 1 each, with a market value of CHF 10 per share. According to the agreement, the CEO and CFO can exercise this entitlement either personally or via CEO or CFO Holding AG.

In 2024, Muster Holding AG created 750,000 bonus shares of CHF 1.00 each and thus share capital totalling CHF 750,000.00 by converting CHF 750,000.00 of tax-recognized capital contribution reserves into share capital. The CEO and CFO have now decided to acquire the 300,000 shares in Muster Holding AG to which they are each entitled at a purchase price of CHF 300,000 via the CEO and CFO Holding respectively.

The bonus shares were not capitalized at Muster Holding AG in accordance with commercial law; their creation was recognized as follows:

• Capital contribution reserves / share capital: CHF 750,000.00

The current issue of 300,000 shares to the CEO and CFO Holding AG will be recognized as follows:

• Bank / capital contribution reserves: CHF 600,000.00

In summary, the structure and the planned transaction are as follows:

Questions

• What are the consequences of the creation of bonus shares?
• What are the consequences of issuing or selling bonus shares at nominal value?
• Would anything change if the CEO and CFO held the shares in Muster Holding AG directly and acquired the 300,000 shares personally?

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Case 3: Factual liquidation / liquidator liability

1. facts of the case

Muster AG was founded in the 1990s. Its shareholder, Mr. Muster, lives in Panama. Muster AG held various minority interests in Mexican companies that operate gold mines. These holdings were sold between 2010 and 2013. As at December 31, 2013, the balance sheet of Muster AG was as follows (figures in CHF):

As at January 1, 2014, Muster AG distributed its liquidity to its shareholder on the basis of a loan agreement. The loan was denominated in CHF and bore interest in accordance with the interest rates of the FTA as per the interest circular. At the beginning of 2021, the CHF loan was converted into a USD loan. The interest has been continuously capitalized since the loan was granted. At the end of 2023, it was decided to liquidate Muster AG, which has since been operating as Muster AG in liquidation.

Mr. Treugut was the only member of the Board of Directors of Muster AG with sole signature from the time it was founded and was entered in the commercial register as liquidator at the end of 2023. Following Mr. Treugut's resignation as liquidator and member of the Board of Directors in October 2024, bankruptcy proceedings were initiated.

As at December 31, 2024, the balance sheet of Muster AG is as follows

In January 2025, the FTA informs Mr. Treugut,

• that there was a non-cash benefit for the years 2021 to 2024 because the interest rate according to the interest circular for CHF was still applied and not the higher interest rate for USD,
• that Muster AG was de facto liquidated
• and that Mr. Muster is jointly and severally liable with Muster AG for the withholding tax on the liquidation surplus.

Questions

• Is there a de facto liquidation?
• Are there monetary benefits in the sense of interest income that is too low?
• Does the liquidator's liability based on Art. 15 VStG apply?