Judgment of 7 March 2012 - Walder Wyss Ltd.

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A-6537/2010 refund application is first rejected by the SFTA but subsequently granted by the Federal Administrative Tribunal, there is no obvious reason why no interest should be payable for the period of delay attributable to the SFTA. Referring to art 168(2) of the Federal Act of 14 December 1990 on Federal Income Tax (FITA, Bundesgesetz über die direkte Bundessteuer, DBG, SR 642.11) the complainant further contends that Swiss tax law also provides for the payment of interest where too much tax has been paid and is subsequently refunded. Moreover, the complainant states that it is not claiming compensatory interest so much as default interest, the reason being that, were the tribunal to uphold the complaint, the SFTA ought to have granted the refund applications rather than rejecting them and hence should have made the refunds. The complainant argued that art 108(3) CO—whereby the debtor is considered in default, without any time limit being set, from the point in time at which his performance is due—could justifiably be applied to this case. The complainant maintains that the SFTA was actually in default from an earlier date, namely 8 July 2008, when the SFTA was set a time limit in which to hand down a contestable decision. Contrary to the complainant’s view, the SFTA was not in default in respect of the refund applications either from 8 July 2008 or from 29 July 2010, the date on which the contested decision was handed down, or from 13 September 2010, the date on which the complaint was lodged. it is important to note that, pursuant to art 3(2) and (3) O-DTC-DK, the SFTA is required to issue a decision or decree establishing the withholding tax to be refunded, if any. Consequently, the SFTA may be said to be in default of the relevant payment only once its refund obligation has been established by means of an order that has entered into force. Such an order may be handed down by the SFTA itself or by a higher instance (Federal Administrative Tribunal or Federal Supreme Court) (cf. art 3(4) O-DTC-DK). The SFTA can owe interest on the refundable withholding tax for the period prior to the entry into force of said order only if compensatory interest is expressly provided for. Unlike default interest, compensatory interest is not conditioned on the SFTA’s being in default (judgment of the Federal Supreme Court 2C_191/2007 of 11 October 2007 cons. 3.2). Compensatory interest is payable where excess tax has been paid and the excess is therefore to be refunded. It is payable from the juncture at which the refund ought to have been made. However, compensatory interest is only ever payable where statutory provision is made for it (judgment of the Federal Supreme Court 2C_410/2008 of 20 October 2008 cons. 3.2; decision of the Federal Administrative Tribunal A-6971/2008 of 8 June 2009 cons. 5.5 with refs.). There is no provision for compensatory interest in the DTC-DK. Article 168(2) 2 FITA cannot possibly serve as the legal basis for such interest in this case, since that provision relates to Federal income tax. What is more, art 31(4) WHTA explicitly states that no interest is payable on amounts to be refunded. In the instant case there is no reason to take a different approach to refunds under the DTC-DK. Moreover, the judgment of the German Federal Fiscal Court (Bundesfinanzhof, BFH) of 29 October 1981 (I R 142/78), which was submitted by the complainant, is of absolutely no relevance to the instant complaint proceeding. Merely for the sake of completeness the tribunal points out that, in said judgment, there was a legal basis on which the BFH could found its view that compensatory interest was payable. In the instant case no such legal basis exists. On this point the complaint is therefore rejected. 8.3. Further, the complainant criticises the length of the refund proceedings before the SFTA. It filed its refund application for dividends falling due in 2007 on 2 August 2007 and for dividends falling due in 2008 on 29 July 2008. The SFTA decision on these applications was made on 29 July 2010. The duration of the proceedings—approximately three and two years respectively— no longer appears to be short. It must be remembered, however, that the instant case turns on Translation © Walder Wyss Ltd. 20 / 23
A-6537/2010 a very complex matter. Furthermore, the SFTA undertook numerous investigative actions which, at least in its opinion, were appropriate. In addition, on several occasions the complainant itself requested extensions of time limits for the submission of the requested documentation (cf. e-mails from the complainant dated 1 April 2009 and 28 April 2009; letters from the complainant dated 22 May 2009 and 22 June 2009, and letter dated 20 January 2010 in reply to an SFTA inquiry made on 29 September 2009). Furthermore, the complainant did not expressly call for a contestable decision until 15 March 2010, ie only some four months before said decision was handed down on 29 July 2010. In the light of all the available facts it is not reasonable to describe the duration of the proceeding as inappropriately long. And in any event, even if the complainant’s claim on this point were to be upheld, there would still be no interest due on the refund amounts (cons. 1.4). The complainant is quite right to assert that, where proceedings regarding the refund of withholding tax are protracted, the fact that no interest is payable on the refund amounts is to the economic detriment of the taxpayer. Contrary to the complainant’s view, however, such detriment cannot result in the payment of compensatory interest where there is no legal basis for such interest. 8.4. Finally, contrary to the complainant’s view, the manner in which the SFTA conducted the proceedings in the instant case cannot reasonably be described as dawdling. The SFTA has the right in an exchange of legal submissions (or, as in this case, more than one exchange) to take new points in law and in fact and to submit fresh evidence (on the admissibility of new arguments in fact and in law in appellate proceedings, cf. Moser/Beusch/Kneubühler, op.cit., ss. 2.196 et seq.). In any event the complainant had ample opportunity—and indeed took that opportunity—to respond to the SFTA’s submissions. 9. 9.1. In the light of the foregoing, the complaint is upheld in part. The tribunal costs are set at CHF 50,000 (art 63(1) APA; art 4 of the Regulations of 21 February 2008 concerning Costs and Reimbursements in Federal Administrative Tribunal Proceedings [VGKE, SR 173.320.2]). Pursuant to art 63(1) APA, court costs are generally borne by the losing party. The degree by which a party loses determines the apportionment of costs and depends first and foremost on the prayers for relief entered in the appeal, based on the substance of what the losing party actually wished to happen (Moser/Beusch/Kneubühler, op.cit., s. 4.43). In the main action the tribunal finds in favour of the complainant (cons. 8.1). However, the complainant has not prevailed in its motion that default interest be paid (cons. 8.2) or in its allegation that its right to be heard had been infringed (cons. 5.2). Given the outcome of the instant proceeding, 1/10 of the court costs—or CHF 5,000—shall be borne by the complainant. Since the SFTA is the lower instance, no court costs may be imposed on it (art 63(2) APA). 9.2. Where a party prevails only partially, its entitlement to reimbursement for legal costs is reduced (art 64(1) APA; art 7(2) Regulations concerning Costs and Reimbursements in Federal Administrative Tribunal Proceedings). Such reimbursement for legal costs covers in particular the costs of legal representation, including the attorney’s fee. This is based on the hours of input required from the legal representatives, with hourly rates for attorneys ranging from the minimum of CHF 200 to the maximum of CHF 400 and for solicitors and other non-attorney representatives from the minimum of CHF 100 to the maximum of CHF 300. In disputes over pecuniary interests the attorney’s fee and/or the remuneration for non-attorney professional representation may be increased by an appropriate amount. The Federal Administrative Tribunal decides on the prevailing party’s reimbursement for legal costs ex officio on the basis of the cost note, where available, and the case documents and is generally not required to state its reasons in detail. Where the reimbursement for legal costs is determined on the basis of a Translation © Walder Wyss Ltd. 21 / 23
Page 1 and 2: Federal Administrative Tribunal Bun
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Judgment of 7 March 2012 - Walder Wyss Ltd.

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