Switzerland vs “Contractual Seller SA”, January 2021, Federal Supreme Court, Case No 2C_498/2020

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C. SA provides “services, in particular in the areas of communication, management, accounting, management and budget control, sales development monitoring and employee training for the group to which it belongs, active in particular in the field of “F”.



C. SA is part of an international group of companies, G. group, whose ultimate owner is A. The G group includes H. Ltd, based in the British Virgin Islands, I. Ltd, based in Guernsey and J. Ltd, also based in Guernsey. In 2005, K. was a director of C. SA.

On December 21 and December 31, 2004, an exclusive agreement for distribution of “F” was entered into between L. Ltd, on the one hand, and C. SA , H. Ltd and J. Ltd, on the other hand. Under the terms of this distribution agreement, L. Ltd. undertook to supply “F” to the three companies as of January 1, 2005 and for a period of at least ten years, in return for payment.

Under a supply agreement C. SA agreed to sell clearly defined quantities of “F” to M for the period from January 1, 2005 to December 31, 2014.

In the course of 2005, 56 invoices relating to sales transactions of “F” to M. were drawn up and sent to the latter, on the letterhead of C. SA. According to these documents, M. had to pay the sale price directly into two accounts – one held by H. Ltd and the other by J. Ltd.

Part of this money was then reallocated to the supply of “F”, while the balance was transferred to an account in Guernsey held by J. Ltd.

The result was, that income from C. SA’s sale of “F” to M was not recognized in C. SA but instead in the two off-shore companies H. Ltd and J. Ltd.


Following an audit, the Swiss tax authorities issued an assessment where C. SA and A were held liable for withholding taxes on a hidden distribution of profits.

A and C. SA brought this assessment to Court.

Decision of the Court

The Court decided – in accordance with the 2020 judgment of the Federal Administrative Court in favor of the tax authorities and the appeal of C. SA and A was dismissed.


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