Criminal withholding tax law - practical cases and outlook
Workshop by Daniel Holenstein on the occasion of the ISIS) seminar on August 30, 2022, entitled "Criminal withholding tax law - practical cases and outlook".
Case 1: late notification
X. AG, domiciled in Bern, held its General Meeting of Shareholders for the 2018 financial year on June 26, 2019, and at this General Meeting approved the annual financial statements, in which it approved non-cash benefits (interest on hidden equity) to its parent company in an EU state. X. AG has a valid authorization to report instead of pay withholding tax (Form 823B). By notification dated December 19, 2019, X. AG submitted the notification.
- The FTA has the X. AG a fine of CHF 750. With good reason?
Case 2: Subsequently determined pecuniary benefit
Ms. A. was a director of more than 20 companies in which natural persons domiciled abroad held shares. These companies had invested in investment properties. The shareholders formed the Advisory Board to the Board of Directors and performed various tasks, including the decision on the sale of properties and companies. They did not receive any fees for this activity, but charged their expenses to one of these companies, B. AG, which charged them to the other companies.
Originally, the companies were based in the canton of Zug. There the procedure remained unobjected. In 2009, the companies moved their headquarters to the canton of Zurich. In the assessment procedure for the tax periods 2009 and 2010, the tax commissioner offset the management costs charged to one of these companies as payments in kind.
This company has (unsuccessfully) defended itself against the offsetting. In the fall of 2014, the Tax Appeals Court of the Canton of Zurich confirmed the offsets.
Subsequently, the Cantonal Tax Office of Zurich offset the expenses of all other companies that were not justified on business grounds. The companies accepted these offsets.
The Cantonal Tax Office of Zurich then reported these offsets to the FTA, which levied withholding tax on all companies on the pecuniary benefits. The companies paid the tax without reservation.
Subsequently, the ASU has opened administrative criminal proceedings against the administrative board member.
- In the administrative criminal proceedings, the ASU sentenced the Board of Directors to a fine of CHF 70,000 for possible intentional evasion of withholding taxes with regard to expenses booked in the 2012 - 2013 financial years under the heading of management costs that were not justified on business grounds. Rightly so?
Case 3: Privately collected refunds
A, B and C each hold 33.3% of the shares in V. AG, all of whom are also members of the Board of Directors. Due to differences of opinion on the corporate strategy, the shareholders agreed that A should "buy out" co-shareholders B and C by acquiring their shares. In the course of the negotiations on the share purchase agreement, B and C "confessed" to their trustee that in the past three years they had divided among themselves refunds from customers which had flowed into a company account known only to the two of them. They justified this by saying that they wanted to compensate for their greater commitment to the company in comparison with A.
- What are the (tax) criminal law risks?
- What should the trustee advise them
Case 4: Statute of limitations
In the final protocol of March 15, 2022, the FTA determined that Z. AG had provided its sole shareholder with pecuniary benefits in the amount of CHF 1.35 million (2014), CHF 80,000 (2015) and CHF 27,000 (2016) in the financial years 2014, 2015 and 2016 without accounting for them. Therefore, the sole shareholder I., who was also a member of the three-member board of directors, had been guilty of evading withholding tax. Z. AG acknowledged the pecuniary benefits provided in the 2015 and 2016 financial years and paid and passed on the tax owed together with interest. On the other hand, it denies having rendered a payment in kind in the 2014 financial year.
- When is the statute of limitations for prosecution for the monetary benefit in fiscal year 2014 if Z. AG
a. submitted to the FTA the financial statements approved on August 12, 2015?
b. submitted to the FTA the financial statements on November 28, 2015?