AFBS Info Tax May 2021

Reform of Anticipatory Tax Regime

The Federal Council published its dispatch to Parliament on the reform of the Anticipatory Tax Regime. It proposes to abolish the tax altogether except for withholding on interest payments to Swiss resident taxpayers. This is a profound change with respect to the initial proposal which aimed at extending anticipatory tax to interest payments of Swiss and foreign source. In the same context, the Federal Council published a draft revision of the Ordinance proposing to lower the holding threshold from 20% to 10% for exemption from withholding of intra-group transfers.

Info: AFBS Summary: LINK – Federal Council: DE FR IT

Refund of Swiss Anticipatory Tax to Foreign Investor

The Swiss branch of a foreign bank was refused refund of anticipatory tax as the amounts could not clearly be attributed to the branch. The application for refund by the foreign parent was rejected for having been filed too late. The Federal Supreme Court confirms that the default deadline of three years can be assumed to be applicable if no deadlines are specifically established and even if no explicit mention is made.

Info: Swiss Federal Supreme Court (in FR): LINK

Taxation of Digital Economy

Digital Economy

The OECD project of taxation of the digital economy has been re-named to become taxation of the "digitalised economy". Its scope has been extended to make it become an initiative for harmonisation of taxation of international companies. It consists of two pillars.

Pillar1 proposes the scheme of market taxation by subjecting services to taxation at the place of consumption rather than the place of provision.

Pillar2 introduces the harmonisation of tax rates and determination of taxable assets/income according to OECD standards. It includes all companies, also banks, with global turnover in excess of EUR 750 Mio. The scope is defined at the level of the global group entity, including subsidiaries, branches, and other controlled entities. Thus, SPV and investment companies may also fall in scope.

The project is in implementation phase and expected to become effective in 2023, year when first countries may start applying the rules. The Swiss government is evaluating mitigating measures.

Automatic Exchange of Information

At the same time the OECD is assessing the way in which the Automatic Exchange of Information should extend to digital assets such as tokens and crypto coins. One strategy favours an extension of the existing standards while a second strand advocates the introduction of a completely new regulatory framework applicable exclusively to digital assets.

SFTA Activity Report

The Swiss Federal Tax Administration has published its activity report 2020. The report offers numerous graphs and statistics on revenue generated by the federal tax: Interesting points:

  • Income from VAT decreased due to the COVID19 pandemic; more than 60% of account statements were filed electronically; to lighten the burden on liquidity deadlines for processing claims for VAT refund were shortened.
  • Income from direct federal tax was above budget.
  • Income from anticipatory tax decreased by over 35% as a consequence of reduced gross earnings; refusal for refund increased both for Swiss and foreign resident investors.
  • Income from stamp duty tax on turnover increased; total income from stamp duty tax was highest since 2022.
  • There is a strong increase of requests for international administrative assistance issued by Switzerland (from 10 in 2016 to 50 in 2020); decrease of requests received (peak at over 60,000 in 2016).
  • In the context of the Automatic Exchange of Information Switzerland received 2.3 Mio reports while it issued 3.5 Mio; reports received originate mostly from Germany, Portugal, France.

Info: Swiss Federal Tax Authority SFTA DE FR

SBA Tax Seminar

In a recent SBA Seminar on tax matters the following topics were addressed:

Reform of Anticipatory Tax: see special point in this AFBS Info.

New rules for value adjustments following the expected credit loss principle provide for a three-stage approach with adjustments based on a model approach, flat adjustments and case-by-case adjustments. Banks of categories other than 1 and 2 are allowed to apply alternative calculating models, IFRS-GAAP, or incurred-loss approach (cat 4 and 5 banks).

Note the following changes in the realm of VAT: * Amendments to Info 14 confirm that the change of concept from distribution to offering does not lead to material change. * Info 13 clarifies that electronic service is considered as such if it is provided via internet or a similar network, is automated and would be impossible without IT; this helps to clarify the place of provision and consumption of a service and thus its taxation.

The EU is assessing a revision of the VAT regulation, which may lead to abolition of exemption from VAT of financial services. No immediate impact is expected for the near future.

In the international exchange there was a peak with 67,000 requests for information in 2016. The numbers returned to the prior level of approximately 2000 requests per year. The number of requests issued by Switzerland peaked at 39 in 2015 and is growing again since 2016 (11) to 46 in 2020. The amount of information on tax rulings decreased both in- and out-bound.

Based upon the recommendations by the peer review regarding information exchange upon request, the Tax Administrative Assistance Act is being amended. Key concerns regard identification of beneficial owners, duration and procedure of exchange of information, confidentiality measures.

In the realm of international assistance, the Federal Supreme Court confirmed that information received in that context cannot be made available to other government bodies, unless upon explicit consent of the issuing party.

European Union

The EU Commission launched a consultation on extending its directive on administrative cooperation DAC8 to the include crypto-assets and e-money. The project aims at assuring consistency with other initiatives in the EU, such as the Digital Finance Strategy and the proposal for regulation on markets in Crypto assets.

Info: EU Commission LINK

The EU Council adopted new regulation to extend administrative cooperation in tax matters including sales through digital platforms. Platform operators are required to report information on sellers from 1.1.2024 relating to transactions from 1.1.2023. The amendment also facilitates exchange of information among tax authorities, means to obtain information on groups of taxpayers, and possibility for officials to be present in another member state during an enquiry.

COVID19

The bilateral agreement on taxation of cross-border workers with Germany has been extended until 30 June 2021 at least. It considers that work from home is assimilated to work in the office for tax and social security purposes. The agreement furthermore clarifies that such a situation does not constitute a permanent establishment.

Info: Swiss Federal Tax Authority DE