The FTA’s clarification of ambiguities in withholding tax regarding resubmission deadlines through its notice dated 13 September 2022

15/09/22

On 13 September 2022, the Swiss Federal Tax Administration (FTA) published a notice regarding the applicable statute of limitation period for claiming a refund of withholding tax in the event of an informal rejection (without issuance of a formal decision) of refund claims. It thereby concretises and confirms the previous practice for resubmitting withholding tax refund claims which have been informally rejected.

Informal rejection of such claims usually occurs in the case of foreign applicants who don't respond to the FTA’s requests for information and documentation or don't respond in a way that's legally adequate. The FTA is taking legal certainty into account in its notice, because questions have repeatedly arisen in practice on this topic in the case of reclaims in an international context.

What's it all about?

The Swiss Withholding Tax Act (Verrechnungssteuergesetz, VStG) generally provides for a forfeiture period of three years for submitting a claim for a withholding tax refund. This means that a claim must be submitted to the FTA within three years of the end of the calendar year in which the income subject to withholding tax was received. In an international context, the claim for a refund can usually be made as soon as the taxable payment is due. According to the Swiss Federal Act on the Implementation of International Agreements in the Field of Taxation (Bundesgesetz über die Durchführung von internationalen Abkommen im Steuerbereich, StADG), the right to a refund in an international context also expires if the claim is not submitted within three years of the end of the calendar year in which the taxable payment became due. This is a forfeiture period that can't be extended.

In addition, neither the VStG nor the StADG contain any provisions on the statute of limitation for claiming a refund. In practice, a relative period of five years applies in this respect. This statute of limitation period begins to run when the right to a refund arises – in the case of shares when the taxable payment becomes due.

If a claim for a refund is informally rejected by the FTA, the question arises as to how the relative statute of limitation period of five years should be taken into consideration. A key question, for example, is whether it is possible to resubmit the same claim and for how long, provided that the applicant is able to provide the outstanding information and any additional relevant documents. In this case, informal means that the FTA reduces or fully rejects the refund without issuing a formal decision.

According to published marginal note 55 on Art. 32 VStG regarding federal tax practices on stamp duties and withholding tax, an informal rejection of withholding tax refund claims by the FTA doesn't cause an interruption of the relative statute of limitation period. The question therefore arises as to which actions do cause an interruption of the statute of limitation period (and thus the start of a new corresponding statute of limitation period).


Concretised practice

With this notice, the FTA has now concretised and confirmed its previous practice with regard to the interruption of the relative statute of limitation period.

The five-year statute of limitation period begins when the right to a refund arises, i.e. in the case of dividends when the dividend payment is due. Therefore, in the case of a dividend payment due on 15 January 2019, the relative statute of limitation period would expire on 15 January 2024. However, this relative statute of limitation period isn't relevant in practice when filing a claim, since a shorter period comes into effect with the three-year forfeiture period for submitting a withholding tax claim that must be observed first. In the above example, the claim for a refund in both a domestic and an international context would therefore have to be submitted by 31 December 2022 in order for the refund claim to be considered received on time by the FTA. The FTA notice has now clarified that submitting a refund claim within the three-year forfeiture period will result in an interruption of the relative five-year statute of limitation period, meaning that the period will restart from the date the refund claim is submitted.

If additional documents are submitted to the FTA by the person submitting the claim, e.g. documents requested by the FTA to substantiate the claim for refund, the statute of limitation period is also interrupted, and the five-year limitation period also starts again from this point.

The FTA has also confirmed in the notice that its own actions, in particular an informal rejection (without issuance of a formal decision) of a refund claim or a request for information and documents, are not relevant in this context and do not interrupt the statute of limitation period. Only actions of the person entitled to a refund towards the FTA that are carried out for the purpose of asserting the refund claim can cause an interruption of the five-year relative statute of limitation period.

Impact on practice

Foreign claimants whose refund applications have been informally rejected by the FTA must pay especially close attention to the five-year relative statute of limitation period. This period runs from the last action taken by the claimant to assert its refund claim against the FTA, and the date in question must be demonstrated accordingly. A formal (partial or total) rejection letter or a request for further documents by the FTA will not by itself cause an interruption of the statute of limitation period.

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Luca Poggioli

Luca Poggioli

Director Tax & Legal Services, PwC Switzerland

Tel: +41 58 792 44 51

Julia Stoecklin

Julia Stoecklin

Manager Tax & Legal Services , PwC Switzerland

Tel: +41 58 792 21 71