Background

Profit distributions of a Swiss company are subject to a 35% withholding tax. However, in case the recipient of the distribution is a Swiss parent company or a foreign parent company which is entitled to double tax treaty benefits, the ordinary withhold and refund procedure may be substituted with the so-called notification procedure.

In this case, the Swiss Federal Tax Administration (SFTA) needs to be notified of the distribution within 30 days after its due date. In response to a 2011 Swiss Federal Supreme Court decision, where the latter had held that the notification procedure was not permissible if the notification deadline was not met, the SFTA installed a practice where it obliged taxpayers to go through the ordinary withhold and refund procedure even if all other requirements for the application of the notification procedure were met. Additionally, the SFTA claimed a 5% p.a. late payment interest on the respective withholding tax amount.

As a reaction to this practice, the Swiss Parliament amended the Withholding Tax Act in order to allow for the application of the notification procedure even if the 30 days deadline has been missed. Accordingly, the new rules prohibit the SFTA from charging late payment interest in such a constellation. The amendment entered into force on 15 February 2017 and includes a provision which stipulates a reimbursement of late payment interest that was charged under the old rules under certain conditions. However, in order to benefit from this retroactive refund possibility, affected taxpayers are required to reclaim the paid late payment interest before 15 February 2018.

Required Action

Companies that have already paid the late payment interest under the old practice but would have been entitled to apply for the notification procedure under the new provisions must have filed an application for reimbursement to the SFTA by 15 February 2018. There is no reimbursement ex officio.

With the deadline approaching, our team will be happy to answer any questions you may have and assist you with the filing of the reimbursement request.

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