SWITZERLAND Law and Practice Contributed by: René Matteotti, Monika Bieri, Daniel Schönenberger and Manuel Ulrich, Tax Partner AG
taxpayer is not domiciled in Switzerland or payment of the tax owed by them appears to be at risk. The freezing order is immediately enforceable and has the same effects in the debt collection proceedings as an enforceable court judgment. Withholding Tax, Stamp Duty and VAT In contrast to the cantonal tax administrations, the SFTA can raise transfer pricing issues in connection with withholding tax, stamp duty and VAT. As at the cantonal level, the taxpayer can object to a negative decision of the SFTA before appealing to the court. As such a decision affects taxes being levied by a federal administrative authority, the appeal has to be lodged with the Swiss Federal Administrative Court (FAC)– within 30 days. This court’s decision can then – again within 30 days – be appealed with the FSC. 14. Judicial Precedent 14.1 Judicial Precedent on Transfer Pricing Due to Switzerland’s practice of issuing transfer pricing rulings and its APA programme, disputes on core transfer pricing issues that have to be settled by courts are relatively rare. Nevertheless, the FSC as well as the FAC have recently issued important decisions that raise key issues in the field of transfer pricing. Furthermore, it can be observed that cantonal courts are also scrutinising transfer pricing in more detail and increasingly refer to the OECD TPG. 14.2 Significant Court Rulings Decision of the Federal Supreme Court (BGer 6B_90/2024 and 6B_93/2024) In 2011, a real estate company belonging to an MNE received a CHF93 million long-term loan from an Irish group company, bearing interest at 3.15% per annum. During a cantonal audit in 2014, this interest rate was deemed excessive even if the interest rate was within the interquartile range of a benchmark study prepared retroactively due to the audit. To settle the case, the cantonal tax authorities and the taxpayer agreed on an arm’s length interest rate of 2.5% per annum. How - ever, the taxpayer did not proactively declare this hid - den dividend to the SFTA subject to Swiss WHT rules. Only in July 2016 was the WHT due paid.
Starting in 2018, the SFTA opened criminal proceed - ings for WHT purposes against an unknown entity. Later, the proceedings were extended to the taxpay - er’s controller, who was accused of failing to fulfil the WHT obligation for 2014, despite knowing since the beginning of 2015, based on the compromise with the cantonal tax authority, that the interest rate was not at arm’s length. An external adviser of the firm was charged with incitement, on the grounds that he had allegedly induced the business controller not to file a declaration. The Federal Supreme Court supported the arguments of the cantonal court and confirmed the business con - troller’s conviction. The adviser, on the other hand, was acquitted of the incitement charge. According to the Federal Supreme Court, the adviser merely fulfilled his mandate by defending the contested interest rate before the tax authorities and analysing potential tax risks, without prompting the controller to neglect the WHT decla - ration. It could not be proven that the adviser had instigated the controller. This assessment was mainly made due to the fact that a memo prepared by the adviser, which stated that the WHT risk was high, has been sent to the controller after the due date of the WHT. This case makes it clear that employees can face criminal prosecution if they violate tax regulations. Due to his role and the course of events, the taxpay - er’s controller was clearly aware that the interest pay - ments were not at arm’s length and therefore consti - tuted a declarable hidden dividend. He failed to make the self-declaration required by law – according to the Federal Supreme Court at least with contingent intent. The personal fine of CHF 8,000 was confirmed. Decision of the Federal Supreme Court (BGer 9C_690/2022) The Federal Supreme Court case 9C_690/2022 involved a Swiss entity that received intra-group financing from its parent company at 2.5% per annum (unsecured loan) and 3% per annum (credit line). Dur - ing the cantonal assessment, the Zurich Tax Admin - istration deemed 1.08% per annum to be the arm’s length interest rate, based on its own benchmarking
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