The Swiss Federal Supreme Court (“the Court“) has made a new decision concerning Swiss stamp transfer tax (“SSTT”). Please click here to read the full text of the Court decision (only available in German). The decision specifically addresses two separate questions concerning (1) the identification as securities dealer for SSTT purposes (“Securities Dealer”) as well as (2) the treatment of direct proxy relationships for SSTT and the relevance of the information in the SSTT journal.
Identification as Securities Dealer
The Court states that – for all Securities Dealers other than banks – the status as Securities Dealer must be proven with valid identification documentation (i.e. with the blue securities dealer card (“Blue Card”)). The obligation for a Securities Dealer to pay one-half SSTT for another Securities Dealer is waived only if such other Securities Dealer provides (i) a copy of its Blue Card, (ii) at the time of concluding the transaction (or at the latest three days thereafter). Any other form of identification as Securities Dealer, or a retrospective identification with the Blue Card (i.e. after three days of concluding the transaction), is null and void.
SSTT is based on the principle that a Securities Dealer never has to pay (one-half) SSTT for another Securities Dealer. In order to comply with this principle and to avoid an unintended multiple burden of SSTT, the Court has failed to allow (a) an alternative form of identification as a Securities Dealer other than the Blue Card (such as proof of payment of the one-half SSTT by the other Securities Dealer) and/or (b) a retrospective identification as Securities Dealer.
Direct proxy relationships and the relevance of the information in the SSTT journal
The Court confirmed without question that the legal form of the transaction is relevant for SSTT purposes. Where one party (i.e. a representative) acts in the name and on behalf of another (represented) party, and places orders to trade securities with a Securities Dealer, the transaction should be treated for SSTT purposes as though it is made by such other represented party, assuming it is correctly reflected in the Securities Dealer’s SSTT journal.
In the present case, the Securities Dealer listed both the name of the representative (i.e. an asset manager) and the represented party (i.e. a collective investment scheme) in its SSTT journal and, based on the represented party’s SSTT qualification as an exempt investor, did not levy a (one-half) SSTT. The Swiss Federal Tax Administration (“SFTA”) however denied the direct proxy relationship and instead deemed that SSTT should have been levied.
According to the Court, the applicable legislation does not preclude Securities Dealers from naming the representative alongside the represented party in the SSTT journal. The Court also confirmed that it is impossible for the representative and the represented party to both be contracting parties to the same transaction. As a result, in cases where more than one party is named in the SSTT journal, the Court ruled that during an SSTT audit the SFTA is required to investigate (within reason) which party has the actual contractual relationship. This means that in the event of (possible) ambiguity in the SSTT journal, the SFTA cannot arbitrarily rely on the name of the party which would produce the greatest SSTT charge, without at least performing a reasonable investigation of the legal form of the transaction.
It is welcomed that the Court confirmed the relevance of the legal form of the transaction for SSTT purposes – as opposed to merely the information contained in the SSTT journal – and that the SFTA has an investigative obligation beyond the examination of the SSTT journal. For direct proxy relationships it is permissible for a Securities Dealer to list both the representative and the represented party in the SSTT journal, if applicable.