New reporting procedure for the withholding tax
On 15 February 2017, the amendment of the Federal Act on Withholding Tax (VStG) came into force, which entailed a new regulation for interest on arrears in the reporting procedure.
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In its decision of 24 July 2017, the Federal Supreme Court applied these new rules in seven cases:
- decision of 24 July 2017 (2C_197/2015)
- decision of 24 July 2017 (2C_801/2015)
- decision of 24 July 2017 (2C_823/2015)
- decision of 24 July 2017 (2C_836/2015)
- decision of 24 July 2017 (2C_843/2015)
- decision of 24 July 2017 (2C_1079/2015)
- decision of 24 July 2017 (2C_1080/2015)
The cases had been suspended due to legislative efforts and were now resumed after the revision of the VStG came into force.
Previous jurisprudence
The notification procedure according to Art. 20 VStG is intended to facilitate dividend payments within the group by not requiring the payment of WHT on such distributions. With the ruling 2C_756/2010 in January 2011, the Federal Supreme Court surprised many companies and advisors when it ruled that the thirty-day notification period was not a deadline for compliance, but a deadline for forfeiture. Thus, if the deadline was missed, the right to the reporting procedure expired and the WHT as well as a default interest became due. While the taxes paid could be reclaimed, the interest on arrears could not and constituted a final charge. Subsequently, the FTA applied this decision consistently, which led to many "late" reports and corresponding tax and default interest invoices from the FTA and triggered major discussions and appeal proceedings.
New legislation
In the seven cases mentioned above, the thirty-day deadline for reporting intra-group dividends was not met and the FTA then demanded payment of the withholding tax and the interest on arrears. With the new legislation, the thirty-day period for filing applications remains in force (Art. 16 para. 1 lit. c VStG); however, in the future, according to the revised Art. 16 para. 2 VStG, the reporting procedure can be applied after this period has expired, provided that the substantive prerequisites are fulfilled and no interest on arrears is owed. According to Art. 20 para. 3 VStG in connection with Art. 64 VStG, the belated reporting can now "only" be fined with a maximum of CHF 5000. The revised Art. 70c para. 1 of the VStG expressly stipulates that this new provision shall also apply to situations "[...] which occurred before the coming into force of the amendments of 30 September 2016, unless the tax claim or the interest on arrears claim is time-barred or has already been legally established before 1 January 2011". These new provisions, which are to be applied retroactively, are binding for the Federal Supreme Court (Art. 190 BV) and thus allow the complainants to make use of the reporting procedure in these cases without having to pay interest on arrears, despite a late application. The complaints were all partially approved, as far as they were admissible.
Final remark
The amended legislation and the adjusted jurisdiction of the Federal Supreme Court let many companies heave a sigh of relief. A long ordeal has come to a good conclusion. The excessive formalism with the strict observance of the thirty-day reporting deadline comes to an end and the more flexible practice that was in force before the unfortunate Federal Supreme Court decision in January 2011 returns. The only thing the companies are still threatened by is a fine and this seems to be more than bearable in comparison. But in any case, the best solution for a company is to consistently comply with the thirty-day reporting deadline.
