Newsletter Tax Notes
Our newsletter provides concise, clear and understandable information on developments in tax practices that have an impact on the Swiss market.
On July 17, 2019, the American Senate approved the long-blocked protocol of amendment of September 23, 2009, on the double taxation agreement between Switzerland and the U.S. (DTA U.S.). The main object of the protocol is to include a provision on the exchange of information in accordance with the OECD standard. The Swiss Federal Assembly approved the protocol already on June 18, 2010. It will enter into force with the exchange of the instruments of ratification.
In the vote on Sunday, May 19th, 2019, Swiss voters adopted the “Tax reform and AHV financing” bill. The Federal Council and Parliament thus address two important political issues: on the one hand, ensuring a competitive, internationally compliant tax system and on the other hand, securing adequate AHV pensions in the future.
In practice, it ought to be observed that taxable individuals are repeatedly confronted with the same difficulties when it comes to the correct completion of the Securities Directory (Wertschriftenverzeichnisses, SD). Four problem areas can thereby be identified which raise the most questions in practice.
March 2019 – Tax Cuts and Jobs Act (TCJA) can heavily impact Swiss residents
if they are considered as Section 958(a) shareholders
U.S. taxpayers continue to analyze and adapt to the new international taxation regimes introduced by the Tax Cuts and Jobs Act (TCJA), including the Section 965 inclusion, global intangible low-taxed income (GILTI), foreign derived intangible income (FDII), and the base erosion anti-abuse tax (BEAT). The aim of this article is to highlight potential tax consequences for Swiss residents with US passports/green cards arising from the repeal of the downward attribution rules of Section 958(b)(4) of the US Internal Revenue Code (US IRC). The new US tax law modifies the attribution rules that apply for purposes of the anti-deferral rules of subpart F under US IRC. The second part of the article discusses potential planning solutions for mitigating the tax exposure rising from the repeal.
The question of the reimbursement of withholding tax remains a topical issue. The periodic checks of the Swiss Federal Tax Administration that as of late are carried out merely by correspondence raise various questions in this respect.
We are pleased to inform you in today’s newsletter about the withholding tax consequences in the sale of shell companies.
Who hasn‘t already heard of shell companies or come across ads in the press in which share certificates are offered for sale or sought as purchase objects? However, the possible tax-related consequences of the purchase or sale of shell companies must be taken into consideration.
We are pleased to inform you in today’s newsletter about the following topics:
- Arm’s length interest rates of cash pools
- ANOBAG – Occupational benefits insurance
As part of a tax audit in Swiss companies regarding income or withholding tax, almost always the interest on loans from and to group companies is audited. Also regularly reviewed is the interest rate of cash pools in terms of its qualification as “at arm’s length”. Experience has shown that – whether and to what extent the interest rates as per the annually published circular letter of the Swiss federal tax administration (CL SFTA) are applicable to cash pools – is not handled in a uniform manner.
In the previous tax notes, we pointed out the risk of a transfer stamp tax liability when arranging employee shares. In addition to the transfer stamp tax liability from the purchase and sale of securities, there is also a tax liability on premium payments for insurance policies if they are part of the portfolio of an insurer subject to federal supervision or of a domestic insurer under public law. The majority are probably aware of this. It is less well known that the tax liability ‘passes over’ to the domestic insurance holder, if the latter has taken out an insurance with a foreign insurer who is not subject to federal supervision (with exceptions for various types of insurance).
In its decision of 28 February 2018 (A-7299/2016), the Federal Administrative Court had to deal with the eligibility for refund of the Swiss withholding tax levied on a dividend paid to an Irish group company. Of particular interest in the present case is the fact that, in addition to the direct parent company of the receiving company (which also has its registered office in Ireland), the final beneficiary shareholder and ultimate parent company – a world-leading industrial group based in Italy- falls within the scope of the EU-Swiss agreement on the taxation of savings income.
In September 2014, the Federal Council of Switzerland opened the consultation procedure on Corporate Tax Reform III. Taking international developments into account, the Swiss tax system is to be developed further and competitiveness strengthened.
PrimeTax has identified the essential elements which are likely to be discussed over the course of next year’s parliamentary proceedings.
As a result of the change of system from the nominal value to the capital contribution principle introduced on January 1, 2011, capital contribut ed to premium can now be returned to shareholders free of tax. This applies to the repayment of capital contributions by both domestic and foreign companies.