Swiss withholding tax: Correction of mal practice for interests for late notifications 

in Tax, 20.09.2016

The smaller chamber of the Swiss parliament voted on 20 September 2016 in favor of many Swiss tax payers which have been threatened with substantial payments for late interest due to late notification of dividends. Swiss Federation to release CHF 600 million.

The issue goes basically back to autumn 2011 when the Federal Supreme Court decided on a case in connection with the application of the notification procedure and its consequences in case of late filing. Based on this case the Federal Tax Authorities saw it as legitimate to apply a very rigid practice in connection with the notification procedure on dividends for withholding tax purposes – regardless whether the tax payer fulfilled all the substantive conditions for applying the notification procedure or not. Whereas prior to autumn 2011 the tax administration accepted late notifications without any reservations they all of a sudden requested an effective cash transaction of the tax with refund and an interest of 5% for late notification despite the fact that no taxes where in fact due in the first place. This lead to the Tax Authorities asking for a total of CHF 600 million in late interest for taxes the tax payers have actually never been liable for.

After heavy debating over the last three years the Swiss smaller Chamber voted in agreement with the larger Chamber for an amendment of the Withholding Tax Code with retrospective effect, i.e. that such failure of late notification should not trigger any interest but is only subject to a spot fine or a penalty. The upcoming final vote of the entire Swiss parliament is to be seen as mere formality. Theoretically, a referendum would be possible. However, this seems rather unlikely for the time being.

Therefore all pending cases should be solved as soon as the amendment of the Swiss Withholding Tax Code will come into force within the next months.



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