The case
Refund of withholding tax; disguised liquidation. In 2013, A. SA (complainant) had bought all its shares in SI. SA (open reserves of approximately CHF 500,000) from a foreign shareholder at a price of approximately CHF 7.3 million. The asset of SI. SA was a property with a book value of approximately CHF 5.1 million. On the same day, A. SA sold SI. SA to the C. Foundation for a price of CHF 18.2 million. Thus A. SA realised a profit of approximately CHF 12.6 million. The FTA refused the “reporting procedure” and subsequently the refund of withholding tax due to tax avoidance (disguised liquidation). Based on the overall circumstances, the Federal Administrative Court also affirmed the existence of tax avoidance. In particular, the argument of A. SA that it had originally wanted to hold the property, but took advantage of the exceptionally good opportunity to sell the property, was not valid according to the Federal Administrative Court. The Federal Administrative Court then also rejected the refund of 15% of the withholding tax because the former shareholder could have used a DTA, pointing out that case law had already completely rejected the possibility of a refund in other cases of tax avoidance. Moreover, the former shareholder’s DTA claim had not been proven in any case. Dismissal of the appeal.
Source: taxlawblog and Federal Administrative Court: Judgment of 10 March 2022 (A-4347/2019) (French) – Interesting reasoning.
The commentary
The sale of the main asset (property) of the company to a third party and the subsequent distribution of a dividend is qualified as tax avoidance. This is disputed. Therefore, the case will probably be taken to the Federal Supreme Court.
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