Forfeiture of the right to reimbursement (new law)

Since 1 January 2019, a new provision on forfeiture of the right to reimbursement pursuant to Art. 23 VStG [Federal Withholding Tax Act] has been in force. If the reimbursement claim has not yet been legally determined, the new law applies to all claims that have arisen since 1 January 2014 (Art. 70d VStG).

There are already two Federal Supreme Court decisions on the forfeiture of the withholding tax reimbursement claim under the new law.

The Federal Supreme Court decision 2C_1069/2018 of 23 April 2019 concerns the taxpaying spouses A.A. and B.A., who declared their shareholding in the 2015 tax return, but not the dividends distributed by Galerie D. The tax assessment ruling was then issued by the tax authorities of the canton of Basel-City. In the assessment ruling, the tax administration of the Canton of Basel-Stadt then added the dividend income of CHF 130'000. In the assessment report, it informed the spouses that there was no entitlement to a refund of the WHT for lack of a proper declaration.


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In Federal Supreme Court decision 2C_37/2019 of 16 August 2019 again concerns a married couple who stated their shareholding in D. AG in their tax return for 2015, but not the dividends distributed in the corresponding tax period. The tax administration of the Canton of Basel-Stadt calculated, within the framework of the processing of the 2015 tax returns, that dividends and also informed the couple that they were not entitled to a refund of the withholding tax due to non-declaration.

Distinction between negligent and intentional non-declaration

Anyone who, contrary to statutory provisions, fails to declare income or assets subject to withholding tax to the competent tax authorities will normally forfeit the right to Reimbursement (Art. 23 para. 1 VStG). According to Art. 23 para. 2 VStG (new law), however, the forfeiture of the claim for restitution does not occur under the condition that, firstly, the income or the assets were not declared in the tax return due to negligence and secondly, in an assessment, audit or after-tax procedure that has not yet been legally concluded subsequently declared (lit. a) or added by the tax authority (lit. b). In addition, according to Circular Letter No. 48 of the Swiss Federal Tax Administration, the right to a refund is not forfeited even if the taxpayer has made the non-declaration by making a self-declaration without penalty in accordance with Art. 175 para. 3 DBG, provided that he was negligent with regard to the original non-declaration. This new regulation accordingly requires a precise dispute in each individual case, whether negligently or intentionally not declared.

In the first decision 2C_1069/2018, it was undisputed between the parties that the parties erroneously and thus negligently did not declare the dividend income and the tax administration of the Canton of Basel-Stadt had added the income based on its own assessment. Therefore, the prerequisites of Art. 23 para. 2 VStG were fulfilled, so that the claim for reimbursement was not forfeited. The Federal Supreme Court approved the appeal and the withholding tax was to be refunded to the couple that had lodged the appeal.

As a result of the second decision 2C_37/2019, the appeal was only partially upheld and was rejected by Federal Supreme Court the court of first instance for further clarification of the facts, as it was unclear whether the present case concerned was negligent or intentional non-declaration within the meaning of Art. 23 para. 2 VStG.

On December 4, 2019, the Federal Tax Administration published Circular No. 48 on the distinction between negligent and intentional non-declaration. According to the Federal Supreme Court, the principles of tax evasion must also be applied. Deliberate or at least deliberate attempted tax evasion requires that the taxpayer has acted with knowledge and intent with regard to all elements of the offense (see 12 para. 2 in conjunction with Art. 104 and Art. 333 para. 1 SCC).

Contingent intent is sufficient, whereby the taxpayer considers the occurrence of success to be possible, but acts anyway and thus accepts the occurrence of success (i.e. incorrect submission of the tax return), even if this is not desirable. The taxpayer acts negligently if he either does not even consider the occurrence of success due to carelessness in breach of duty or if he relies on the absence of success (Art. 12 para. 3 StGB). The latter is referred to as "conscious negligence". The distinction between conscious negligence and contingent intent can lead to difficulties in individual cases. The taxpayer acts with carelessness in breach of duty if he does not exercise the expected care that can be expected of him under the circumstances (training, intellectual abilities, professional experience, etc.). In addition, Art. 48 VStG requires the taxpayer to inform the tax authority of all facts that could be relevant to the refund claim to the best of their knowledge and belief. If it is not clear from the tax authorities' files whether the income or assets charged to WHT were declared negligently, it is up to the taxpayer to explain their negligent behavior with regard to the non-declaration or at least make it credible. According to Jurisprudence , in order to prove intent, there must be sufficient certainty that the taxpayer was aware of the incorrectness and incompleteness of the information provided in the tax return. If this knowledge can be proven, there is a presumption that the taxpayer also acted with intent with regard to the false information. This means that the taxpayer deliberately intended or at least attempted to deceive the tax authorities accordingly and thus sought a lower assessment (direct intent) or accepted it (contingent intent). As a rule, another reason for the incorrectness or incompleteness of the information is hardly conceivable, which is why the aforementioned presumption is very difficult to refute.

At decision 2C_37/2019 of 16 August 2019, it was disputed between the parties whether the complainants had acted negligently or intentionally with regard to the non-declaration of the distributed dividends. The complainants stated that they had acted negligently due to the complexity of their financial situation, their old age, lack of legal knowledge and health problems. In addition, they claimed that they had not been able to remember the aforementioned dividend payment, even afterwards. Finally, they argued that if they had intended tax evasion, it would have been better if they had not declared the withholding tax-free interest on the mandatory wall loan from D. AG (including the loan itself) (which they had declared in the present case) and not the dividends subject to withholding tax. On the basis of these arguments, the tax administration of the Canton of Basel-Stadt decided that, despite the amount of the dividends (CHF 900'000), there was a lack of prudence and therefore negligence on the part of the complainants. For a deliberate non-declaration there was a lack of intent to defraud and intent to evade. However, the FTA was of the opinion that the complainants had at least acted with intent because they had knowledge of the distributed dividend or should have had knowledge of it because they had been a supervisory body of D. AG since April 2014. Since the lower court had never stated whether the complainants had deliberately or negligently failed to declare the dividend and the Federal Supreme Court therefore lacked evidence and facts to conclusively assess the case, the Federal Supreme Court referred the matter back to the lower court for further consideration.

Final remark

Although the new provision in Art. 23 para. 2 of the VStG is to be welcomed in itself and basically represents a simplification for taxpayers, it is already becoming apparent in the new Jurisprudence that the distinction between negligent and intentional non-declaration will always prove to be difficult. The reliance on such a subjective element on the part of the taxpayer has its pitfalls. Particularly in cases where the lower instance of the Federal Supreme Court still ruled under the old law, it will regularly not have assessed the question of negligence or intent. However, as the Federal Supreme Court has no jurisdiction to decide this legal question without the necessary evidence and facts, some cases will probably have to be referred back to the lower court in the future. It remains to be seen how Jurisprudence will react to this new problem and whether it will maintain the current distinction between negligence and intent in the case of reimbursement claims by WHT . It should also not be forgotten that restitution claims that have not yet been legally decided but arose before January 1, 2014 are still subject to aArt. 23 VStG and the old Jurisprudence of the Federal Supreme Court are still applicable (see Art. 70d VStG).