Refusal to refund withholding tax due to treaty abuse

Facts

[A.] Holding ApS, a Danish company, received dividends from [F. AG] , a Swiss company, in the year 2000. The [F. AG] had distributed a dividend of CHF 5,500,000, of which CHF 1,925,000 was paid as withholding tax to the Federal Tax Administration. [A.] Holding ApS applied for a refund of the withholding tax, which was rejected by the Federal Tax Administration and the Federal Tax Appeals Commission.

[A.] Holding ApS filed a complaint with the Federal Court and requested the annulment of the decision of the Federal Tax Appeals Commission and the refund of the withholding tax. The Federal Tax Administration and the Federal Tax Appeals Commission requested the dismissal of the complaint.

Considerations

The Federal Court examined whether the refund of the withholding tax was to be refused due to treaty abuse. It found that the Swiss-Danish double taxation agreement does not contain explicit anti-abuse provisions, but that the principle of good faith and the prohibition of abuse of law are also recognized in relation to agreements.

The court found that [A.] Holding ApS acts as a mailbox company without genuine economic activity in Denmark and that the tax relief mainly benefits…