Acquisition of Own Shares - Withholding Tax

Facts

In December 1998, [X. AG] , a company headquartered in Basel, acquired ten of its own bearer shares at a total price of CHF 500,000. As this holding of own shares exceeded the legally permissible limit of 10% of the share capital, the Federal Tax Administration considered the excess portion of five shares as a partial liquidation within the meaning of the Federal Act on Withholding Tax. It levied a withholding tax of CHF 145,250 plus late payment interest. [X. AG] filed an appeal, which was partially upheld by the Federal Tax Appeal Commission. [X. AG] filed an administrative court appeal against the decision of the Appeal Commission to the Federal Supreme Court.

Considerations

The Federal Supreme Court dismissed the appeal. It stated that the requirements for levying the withholding tax under Art. 4a of the Federal Act on Withholding Tax were met, as the acquisition of the own shares had exceeded the legally permissible limit of 10% of the share capital. The appellant had acquired the shares not only as a trustee, but as the owner, as evidenced by the entries in the balance sheet and the purchase contract. The commercial law…