Judgment of 7 March 2012 - Walder Wyss Ltd.

A-6537/2010
securities were sold. The SFTA contended that the sole purpose of these transactions was to
obtain a fiscal advantage. In the opinion of the SFTA, not only was A.____________A/S not the
beneficial owner of the dividends in question, but its actions also constitute an abuse of the
Convention of 23 November 1973 between the Swiss Confederation and the Kingdom of
Denmark on the Avoidance of Double Taxation in respect of Taxes on Income and Wealth
(DTC-DK, SR 0.672.931.41).
J.
On 13 September 2010 A.____________A/S (the complainant) lodged a complaint with the
Federal Administrative Tribunal with the following motions:
‘(1) That the tribunal enter into the complaint; in the alternative, that it be referred back to the SFTA
to be handled as an opposition.
(2) That sections 1 and 2 paragraph 2 of the contested order be set aside and the SFTA ordered to
effect the refund of withholding tax as per the applications made using form 89 no 13855 of 2
August 2007 in the amount of CHF (…), no 13856 of 2 August 2007 in the amount of CHF (…),
no 13857 of 2 August 2007 in the amount of CHF (…) and no 279535 of 29 July 2008 in the
amount of CHF (…) together with interest at the rate of 5% pa since 29 July 2010, in the alternative
since 13 September 2010.
(3) That section 2 paragraph 1 of the contested decree be set aside.
(4) That the Federal Tax Administration be ordered to pay the costs of the proceedings to the
complainant and to indemnify the complainant in respect of all legal costs incurred.’
Further, the complainant submitted the following procedural motion:
‘That a preliminary partial decision be handed down on prayer for relief 3 and be notified to the
Parties in its operative language.’
By way of justification the complainant argued essentially that there is now a very substantial
market for swaps. According to a survey by the Bank for International Settlements, in 2008 the
volume of equity-based over-the-counter derivatives exceeded USD 10,177bn. There were
many sound reasons for investing in an equity swap as opposed to taking a direct investment in
the underlying asset. In addition to avoiding stock market duties and disclosure obligations,
economic commentators stressed the leverage this allowed. In any event the counterparties to
the swap agreements had been residents of DTC countries. With regard to the possibility of
making allowance for the Swiss withholding tax against their profit taxes, the counterparties had
made no tax savings at all from the total return swap.
Furthermore, in terms of their timing the swap transactions were concentrated around the dates
of annual general meetings. Given the Swiss companies’ lower public reporting obligations, this
was largely due to the fact that the information investors needed could be found in the annual
business reports. According to the complainant, equity swaps are internationally common
derivatives that cannot on any account be described as unusual, inappropriate or abnormal.
The complainant alone was responsible for the decision to hedge the transactions by acquiring
the underlyings. Under the terms of the contract between it and the counterparty, payment of
the amount equivalent to the dividends had been independent of whether the corresponding
dividend income was in fact received. Regardless of whether it had hedged the swap, at the
time of the corresponding dividend decision the company had come under an obligation to pay
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