Judgment of 7 March 2012 - Walder Wyss Ltd.

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A-6537/2010 VCLT codified international customary law, those rules may also be applied to conventions concluded prior to the entry into force of the VCLT (judgment of the Federal Supreme Court BGE 122 II 234 cons. 4c) and by countries that have not ratified the VCLT. In accordance with art 31 VCLT, interpretation must be consistent and based on the wording of the treaty provision seen in the light of its usual meaning, the object and purpose of the treaty, good faith and the context. The various elements of interpretation have equal status (decision of the Federal Administrative Tribunal BVGE 2010/7 cons. 3.5 with numerous further references; Jean-Marc Sorel/Valérie Boré Eveno, in: The Vienna Convention on the Law of Treaties: A Commentary, edited by Olivier Corten/Pierre Klein, 2 vols, Oxford/New York 2011, n. 8 ad Art. 31 VCLT 1969). Additional means of interpretation are the treaty documentation and the circumstances in which the treaty was concluded, to which reference may only be made by way of confirmation or clarification of an initial interpretation that is unclear or contradictory (art 32 VCLT). The precept of good faith is to be taken as a guiding principle of treaty interpretation throughout the interpretation process (on this entire subject, cf. also [inter alia] decision of the Federal Administrative Tribunal A-4911/2010 of 30 November 2010 cons. 4.1 with numerous further refs; Daniel de Vries Reilingh, Manuel de droit fiscal international, Berne 2012, n. 109 et seq.). 3.2.1. The starting point for interpretation is the wording of the treaty provision. The text of the treaty provision must be interpreted in and of itself according to its usual meaning. However, this usual meaning is to be ascertained in accordance with the context, the object and purpose of the treaty and the principle of good faith. According to art 31(4) VCLT, an exception to this approach may exist where the treaty parties clearly express their joint intention to use a term not in its usual meaning but in a very specific sense (decision of the Federal Administrative Tribunal BVGE 2010/7 cons. 3.5.1; [inter alia] decision of the Federal Administrative Tribunal A- 4013/2010 of 15 July 2010 cons. 4.6.2 with numerous further refs.). 3.2.2. Article 31(2) VCLT defines what is meant by the context of a treaty provision. Article 31(2). 2 VCLT envisages a narrow interpretation of the term ‘context’. In particular, the context neither includes the circumstances surrounding the conclusion of the treaty (for instance, in the form of the preparatory work, which according to art 32 VCLT may be drawn upon for interpretation purposes only as a subsidiary reference tool; decision of the Federal Administrative Tribunal BVGE 2010/7 cons. 3.5.2) nor elements outside the text itself. Article 31(3) VCLT then defines those elements constituting the ‘external context’ that may be taken into consideration for interpretation purposes in the same way as the context. According to art 31(3)(c) VCLT, any rule of international law applicable to the relations between the contracting states may be factored into the interpretation. There is thus no hierarchy between art 31(2) and (3) VCLT (decision of the Federal Administrative Tribunal BVGE 2010/7 cons. 3.5.4 with numerous further refs.). 3.2.3. The object and purpose of a treaty are the objectives which the parties hope to achieve by concluding the treaty. Article 31 VCLT does not state the sources from which the object and purpose of a treaty may be ascertained. In this regard legal writers generally emphasize the importance of the title and preamble to the treaty (decisions of the Federal Administrative Tribunal BVGE 2010/7 cons. 3.5.2; A-6053/2010 of 10 January 2011 cons. 5.1.3; also, Xavier Oberson, Précis de droit fiscal international, 3rd edn, Berne 2009 [hereinafter: Précis], n. 93). 3.2.4. Where a DTC contains rules modelled on the OECD-MC, it is undisputed in Swiss literature and court practice that the OECD-MC and its official commentaries will carry substantial weight with regard to interpretation of the DTC (Peter Locher, Einführung in das internationale Steuerrecht der Schweiz, 3rd edn, Berne 2005 [hereinafter: Einführung], p 130; Oberson, Précis, n. 96–98; Judgment of the Federal Supreme Court 2A.239/2005 of 28 Translation © Walder Wyss Ltd. 12 / 23
A-6537/2010 November 2005 cons. 3.4.5 and 3.6; 2C_276/2007 of 6 May 2008, published in Steuerentscheid 2008 A 32 No. 10, cons. 5.6). Admittedly, the OECD-MC and its commentaries are likewise governed by the interpretation rules set out in art 31 et seq. VCLT (Jacques Sasseville, Court Decisions and the Commentary to the OECD Model Convention, in: Courts and Tax Treaty Law, pp 189 et seq., 194; Klaus Vogel, in: Vogel/Lehner, Doppelbesteuerungsabkommen, 5th edn, Munich 2008, introduction to n. 125). Accordingly, a term defined in a DTC itself may if necessary be interpreted in a treaty-specific manner as per the rules set out in art 1 et seq. VCLT, with the OECD-MC and its commentaries being taken into consideration as part of the interpretation. Where this is the case, it should be noted that such consideration of the OECD-MC and its commentaries as a supplementary tool within the meaning of art 32 VCLT is, like the other aforementioned interpretation tools, of only subsidiary importance. Given the intended recipients of the OECD-MC and its commentary, ie the government of the OECD member states, are not binding—even in diluted form—on the courts or taxpayers of the member states (decision of the Federal Administrative Tribunal BVGE 2011/6 cons. 7.3.1; 2010/7 cons. 3.6.2; Vogel, op.cit., introduction to n. 124b; Sasseville, op.cit., pp 192–193; Markus Reich/Robert Waldburger, Rechtsprechung im Jahr 2005 [Part 1], published in IFF Forum für Steuerrecht [FStR] 2006, pp 222 et seq., 233-234). 3.3. 3.3.1. From the wording of art 10(1) DTC-DK, whereby dividends paid by a company resident of one contracting state to a person resident of the other contracting state may be taxed only in that other state, it is not clear what exactly is meant by the statement that the payment goes to a person resident of the other contracting state. In particular, the provision gives no clue as to what characteristics that person must have. Nor does the background history to the DTC-DK, which might potentially be taken into subsidiary consideration pursuant to art 32 VCLT (cons. 3.2.2), provide any further relevant indications (cf. decision of the Federal Board of Tax Appeals of 3 March 2005, SRK 2003-159, cons. 3d/aa). The DTC-DK of 1973 follows the same wording as used in art 10(1) of the OECD-MC in its 1963 version. As the complainant rightly points out, this does not contain any mention of the concept of the beneficial owner. This was inserted only in the OECD-MC version of 1977 in art 10(2) OECD-MC (cf. decision of the Federal Administrative Tribunal 2011/6 cons. 7.3.1; cf. also [inter alia] Jessica Salom, L’attribution du revenu en droit fiscal suisse et international, Geneva, etc, 2010, p. 185). 3.3.2. The legal writers’ overriding majority view is that the criterion of beneficial ownership is implicit in every DTC (for this view, see in particular Locher, Einführung, p 152; Robert Danon, Le concept de bénéficiaire effectif dans le cadre du MC OCDE, FStR 2007, p 40). With regard to the DTC-DK the corresponding view can be inferred from the aforementioned decision of the Federal Board of Tax Appeal 3 March 2005, SRK 2003-159, cons. 3d, esp. 3d/cc+dd+ee). This view is largely based on the OECD-MC and its commentaries, the claim being made that the relevant passages in the commentary have merely been supplemented in order to clarify this point, which itself corresponds to the view consistently taken by all OECD member states. There is a dispute amongst the legal writers on the extent to which reference to elements of the OECD-MC or the associated passages in the commentaries that post-date the pertinent DTC text may legitimately be made in order to interpret that pre-existing specific DTC text (Beat Baumgartner, Das Konzept des beneficial owner im internationalen Steuerrecht der Schweiz, Zurich 2010, pp 25 et seq.; de Vries Reilingh, op.cit., n. 159 et seq.; Michael Lang, lntroduction to the Law of Double Taxation Conventions, Vienna 2010, n. 92 et seq.; Stefan Oesterhelt, Bedeutung des OECD-Kommentars für die Auslegung von Doppelbesteuerungsabkommen, ASA 80, pp 380 et seq.; Steffen Lampert, Doppelbesteuerungsrecht und Lastengleichheit, Translation © Walder Wyss Ltd. 13 / 23
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Page 9 and 10: A-6537/2010 the conduct of the priv
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Page 21 and 22: A-6537/2010 a very complex matter.
Page 23: A-6537/2010 against the CHF 50,000

Judgment of 7 March 2012 - Walder Wyss Ltd.

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