Facts
The [X.] Bank, a company based in Denmark, applied to the Federal Tax Administration (FTA) for a refund of withholding tax on dividend payments from Swiss companies in 2006 and 2007. The bank claimed that, as a company based in Denmark, it was the recipient and effective beneficial owner of the aforementioned dividends, and was therefore entitled to a refund under the Double Taxation Agreement between the Swiss Confederation and Denmark.
The FTA rejected three refund applications from the bank and demanded a total of CHF 34,570,678.59, which had been wrongly refunded for four other applications. The [X.] Bank lodged an appeal, which was referred to the Federal Administrative Court as a complaint. The Federal Administrative Court upheld the bank's appeal and ordered the refund of the withholding tax.
The FTA lodged a complaint with the Federal Supreme Court and requested that the judgment of the Federal Administrative Court be set aside and its decision of January 15, 2010, be confirmed.
Considerations
1. Admissibility of the Complaint
The complaint is admissible under Article 82(a) of the FSCA, as it concerns a matter of public law. The complainant is entitled to lodge a complaint under Article 89(2)(a) of the FSCA.
2. Withholding Tax and Double Taxation Agreement
Withholding tax generally results in a final, source-based tax burden for foreign recipients of Swiss dividends. Persons who had their seat or residence abroad at the time the taxable payment was made may only claim a refund of withholding tax to the extent that an international agreement entitles them to do so.
3. Effective Beneficial Ownership
The Federal Supreme Court has held in its landmark decision 2C_364/2012 that effective beneficial ownership is to be understood as a requirement for claiming treaty benefits. The intensity of the relationship between a tax subject and a tax object is decisive, according to the scope of the…