Overview

In a new ruling, the Swiss Federal Court has upheld an appeal by the Swiss Federal Tax Administration (FTA) regarding the calculation of late interest for withholding tax on monetary benefits distributed by a Swiss entity. The decision, referenced as 9C_661/2022, clarifies the timeline for when interest on withholding tax begins to accrue.

Background of the case

The Federal Administrative Court had previously ruled that the interest should begin 30 days after the approval of the annual financial statements. However, the FTA argued that the interest should accrue from the date the monetary benefits were effectively booked, citing that these benefits were due at the time of their booking, not at the approval of the annual financial statements.

Arguments of the parties

The FTA asserted that interest should accrue from the booking date of the monetary benefits, emphasizing that withholding tax claims arise at the time these benefits are booked. The respondent, on the other hand, argued that interest should begin 30 days after the approval of the annual financial statements, aligning with the previous ruling of the Federal Administrative Court.

Key legal findings

The Federal Court’s ruling supports the FTA’s stance, stating that withholding tax claims arise at the time the benefits are booked, making the late interest applicable from that date. The court found no justification for delaying the start of the interest accrual to the approval date of the financial statements.

Storno Praxis

Furthermore, the Federal Court addressed the respondent’s argument regarding the “storno praxis”, a procedure that allows for the correction or cancellation of accounting entries under certain conditions. The court clarified that the storno practice did not apply in this case, as the monetary benefits in question were definitively provided and not reversed or offset by subsequent transactions. Consequently, the original booking dates of these benefits remain the relevant dates for tax purposes.

Conclusion

This decision clarifies the moment when the calculation of interest on arrears begins and also highlights the FTA’s practice of allowing corrections for hidden dividend distributions if they occur inadvertently.

For assistance in understanding and applying these tax regulations, please contact contact@axcord.com.