Updates on withholding tax and stamp duties (2023).
Workshop on withholding tax and stamp duties by Thomas Jaussi and Markus Küpfer on the occasion of the ISIS seminar "Corporate Tax Law 2023" on June 19/20, 2023.
Case 1: Collection of withholding tax; accrual of the tax claim and commencement of the obligation to pay interest on arrears
S AG (hereinafter also referred to as the Company) has its registered office in Canton B and has a fully paid-in share capital of CHF 200,000 divided into 200 registered shares with a nominal value of CHF 1,000. All registered shares of the company are held by Mr. and Mrs. S, both of whom are listed in the Commercial Register as shareholders of S AG with sole signing authority. The purpose of the company is to trade in agricultural machinery and to offer agricultural services (so-called contracting company). The financial year of S AG corresponds to the calendar year. The company holds its general meeting only after the wheat harvest has been completed, i.e. in mid-August. Mr. and Mrs. S also jointly manage a farm on which, among other things, barley, wheat and corn are cultivated.
Based on an audit at S AG, the Swiss Federal Tax Administration (FTA), in a letter dated December 8, 2020, determined monetary benefits totaling CHF 400,000 for the fiscal years 2015 to 2019, resulting in a withholding tax claim of CHF 140,000. At the same time, it interrupted the limitation period for the withholding tax claim against S AG for the 2015 business year. The FTA claimed that S AG had neither claimed nor recorded income that would have been due to it for various activities on the agricultural business of Mr. and Mrs. S (sowing, fertilizing and harvesting). On the basis of documents (e.g. records in the logbooks of tractors of S AG) which S AG had made available to the FTA, it was clear that the corresponding work had actually been carried out. However, it could no longer be determined when exactly the respective services had been performed.
S AG initially disputed both the principle that monetary benefits exist in the present case and, if applicable, the amount of such benefits. It was of the opinion that it was entitled without further ado to provide its services free of charge for the benefit of its shareholders.
In a decision dated February 26, 2021, the FTA - based on the contestation of S AG - reduced the amount of the monetary benefits vis-à-vis the Company and determined the taxable benefits for the fiscal years 2015 to 2019 as follows:
- Business year 2015 CHF 55,000
- Business year 2016 CHF 50,000
- Business year 2017 CHF 70,000
- Business year 2018 CHF 75,000
- Fiscal year 2019 CHF 80,000
The taxable services thus now amounted to a total of CHF 330,000, resulting in a withholding tax claim of CHF 115,500. Since the taxable services (sowing, fertilizing as well as the performance of harvesting work) had in the present case been rendered in the relevant financial years at different times, which in the meantime could no longer be precisely determined, the respective accrual of the tax claim would be determined as of December 31 of the relevant financial year. Based on this, the FTA set the default interest period from January 31 of the following year until the effective payment of the tax debt.
S AG does not agree with this decision of the FTA and lodges an objection on March 15, 2021. In its objection, it continues to dispute the basic withholding tax liability and the amount of the pecuniary benefits. In addition, it argues that the interest on arrears on the outstanding tax claims is not due as of January 31 of the respective subsequent year, but rather only as of July 31 of the respective subsequent year, since it could have made the corresponding adjustment entries under commercial law in accordance with the provisions of the Code of Obligations (in particular Art. 699 para. 2 CO) until June 30 of the subsequent year, which means that there would no longer have been any pecuniary benefits. Thus, the tax claims had only arisen at this point in time and had become due thirty days later.
- Is a withholding tax due in the present case?
- If withholding tax is owed, for what period is interest on this owed?
Case 2: Refusal of reimbursement decision
Ms. Meintesgut is the sole owner of Machtesgut AG. Ms. Meintesgut was definitively assessed for the 2016 tax periods on June 13, 2018 and for the 2017 tax period on December 13, 2019; the assessments have become final in the absence of a challenge.
The cantonal withholding tax office made a final decision on the refund of the withholding tax claimed in the 2016 and 2017 tax returns. Withholding Tax Office issued a final decision for the 2016 tax period on June 20, 2018 and for the 2017 tax period on December 11, 2019. These refund decisions became legally binding in the absence of a challenge.
In 2020, a VAT audit of Machtesgut AG will take place with various offsets in calendar years 2016 and 2017.
On November 25, 2020, based on the VAT audit, the FTA claims monetary benefits for the years 2016 and 2017 with a tax invoice. This tax invoice is accepted and the withholding tax is paid at the end of December 2020 and passed on to Mrs. Meintesgut.
On January 27, 2021, the Trust post-declares the imputed income tax benefits and files for a withholding tax refund.
In its decision of March 31, 2022, the competent cantonal tax administration rejects the application for a refund on the grounds that negligence has not been proven. Tax Administration based on Art. 23 para. 2 VStG, because the negligence was not proven.
An objection to this will be lodged on April 29, 2022.
In its objection decision of October 28, 2022, the competent cantonal tax administration does not accept the objection. The competent cantonal tax administration does not accept the objection on the grounds that Art. 23 para. 2 of the withholding tax law applies on the basis of Art. 70d of the withholding tax law to refund claims that have arisen since January 1, 2014, provided that a legally binding decision has not yet been made on the claim for refund of the withholding tax.
Verbatim from the appeal decision:
In the case under review, the refund of withholding tax 2016 - 2017 was decided by rulings dated June 20, 2018 and December 11, 2019, respectively. These decisions were already legally binding at the time of the assertion of the additional claim in 2021. Therefore, 23 para. 2 VStG cannot be applied either. According to the BGE 2C_418/2019 of September 12, 2019, the transitional rule also applies if a legally binding refund decision is revoked by the tax authority and a repayment of the refund granted is ordered. However, this is not the case here. Rather, the taxpayers here would like to apply for a higher refund. In this case, however, the retroactive effect does not apply due to the clear wording of the law. Therefore, the objection of April 29, 2022, cannot be accepted.
Is this objection decision by the cantonal tax administration correct? tax administration correct and how can it be appealed?
Case 3: Self-disclosure in inheritance cases
A is the daughter and sole heir of B, who died on October 2, 2021. After accepting the inheritance, A discovered that assets, domestic SMI shares with a value of approximately CHF 3,000,000, and the income therefrom, between approximately CHF 70,000 and CHF 100,000 per year, had not been declared by the decedent. Her legal representative will therefore file a non-punitive voluntary declaration in inheritance cases for the tax periods 2018, 2019 and 2020 in spring 2022, which is why the corresponding assets and income therefrom will be subject to ordinary taxation for the tax periods 2018, 2019 and 2020 in an after-tax procedure.
As part of the voluntary disclosure, A's legal representative also requested the refund of the withholding tax deducted on the post-declared investment income as follows:
- 2018: CHF 25'000
- 2019: CHF 30'000
- 2020: CHF 30'000
In its refund decision in the fall of 2022, the competent cantonal tax administration rejects the application for a refund. Tax Administration rejects the requested refund because the decedent obviously failed to declare the subsequently declared assets and investment income with at least possible intent and therefore the declaration was not proper within the meaning of Art. 23 VStG. The appeal against this restitution decision is also rejected in December 2022 on the same grounds.
Is sole heir A to be granted a refund of the withholding tax deducted on the decedent's post-declared investment income or not?
Case 4: Is a subsequent declaration worthwhile?
The Wohltat-Stiftung and the Guttut-Stiftung are tax-exempt due to their charitable status based on Art. 56 Bst. g DBG and the corresponding cantonal provisions. provision. They each hold 50 percent of Hilf-immer-AG. This company is also tax-exempt on the basis of Art. 56(g) DBG and the corresponding cantonal provision. This company is also exempt from tax due to its non-profit status. Hilf-immer-AG holds 100 percent of Fleissig-AG. This company carries out operational activities and is subject to ordinary taxation. The Wohltat-Stiftung and the Guttut Stiftung grant a license to the Hilf-immer-AG; the latter in turn grants a sub-license to the Fleissig-AG, which is useful for the operational business. Fleissig-AG pays the agreed license fee and pays a dividend to its shareholder every year. Hilf-immer-AG pays the contractual agreed royalty and passes on the remaining net income as an expense item to its two shareholders. The royalties are in line with the third party comparison and are not objectionable for tax purposes.
The structure and power flows are as follows:
The balance sheet and income statement of Hilf-immer-AG are as follows, this accounting method having been maintained for over 20 years:
How should this situation be assessed for withholding tax purposes?
- In the event of an audit by the FTA in 2022?
- In the event of a subsequent declaration by the Hilf-immer-AG in 2022?