Switzerland vs “Contractual Seller SA”, May 2020, Federal Administrative Court, Case No A-2286/2017

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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 favor of the tax authorities.

“The above elements relied on by the appellants in no way provide proof that the appellant carried out the said transactions on behalf of the other companies in the [G]B group. Moreover, they do not in themselves allow the conclusion that the appellant acted through the other companies in its group, as the appellants maintain. Insofar as, as has been seen (see recital 5.1 above), the contract for the sale of *** was concluded and the relevant invoices issued in the name of the appellant, which is moreover designated as the seller in the sales contract (see heading and point 9. 2(a) of that contract), and that the other companies in the group are never mentioned in the context of the transactions at issue, it is much more appropriate to hold that they were carried out, admittedly for the benefit of the appellant, but through the appellant acting in its name and on its behalf. Therefore, by renouncing the resulting proceeds to the appellant, the appellant did indeed make concealed distributions of profits, i.e. appreciable cash benefits subject to withholding tax”

“In these circumstances and insofar as the proceeds from the sale of *** were paid directly by [C. SA.] O. to the companies [H Ltd and J Ltd.] Y. and X.     – which must undoubtedly be regarded as persons closely related to the appellant within the meaning of the case-law (cf. recital 3.2.1 above) -, without any equivalent consideration in favour of the appellant, and that part of those proceeds was reallocated to the supply of *** (cf. d above), the lower authority was right to find that there was a taxable supply of money (see recitals 3.2.1 and 3.2.2 above) and to calculate this on the basis of an estimate of the profit resulting from the purchase and resale of *** (see decision under point 4.3, pp. 10 et seq.)”

“In the absence of any document attesting to an assignment to the appellant of the claims arising from the purchase contract with [L] M. and the supply agreements of November 2004 with [M] O.     In addition, there is no reason to consider that the allocation of the profit resulting from the purchase and resale of *** to the companies of the group based abroad constitutes the remuneration granted to the latter for the takeover of the two contracts (purchase and sale), nor is there any justification for deducting the value of those contracts from the amount retained by the lower authority. The appellant’s submissions to this effect (see the memorandum of 12 May 2015, pp. 22 et seq. [under para. 6]) must therefore be rejected. Accordingly, the court of appeal refrains from carrying out the expert assessment requested by the appellant in order to estimate that value (see the memorandum of 12 May 2015, p. 25 [under section V]; see also section 2.2.1 above).”

“… it should be noted that, in view of the foregoing and the size of the amounts waived by the appellant, the taxable cash benefit was easily recognisable as such by all the participants. Consequently, and insofar as the appellant did not declare or pay the relevant withholding tax spontaneously, the probable existence of tax evasion must be accepted, without it being necessary to determine whether or not it was committed intentionally (see recitals 4.1 and 4.2 above). Accordingly, there can be no criticism of the lower authority’s application of the provisions of the DPA and, since a contribution was wrongly not collected, of Article 12 paras. 1 and 2 of that Act in particular.”

“The contested decision must therefore also be confirmed in this respect. Finally, as the case file is complete, the facts sufficiently established and the court is convinced, the court may also dispense with further investigative measures (see section 2.2.1 above). It is therefore also appropriate to reject the appellant’s subsidiary claim that he should be required, by all legal means, to provide proof of the facts alleged in his appeal.”


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