Federal Law on the Execution of International Tax Agreements

Dear reader,

The Federal Law on the Execution of International Tax Agreements (hereinafter LECF) entered into force on January 1, 2022.

This law regulates the execution of international conventions concluded by the Confederation in the field of taxation, in particular with a view to avoiding double taxation, insofar as their execution is not regulated by other federal laws in the field of taxation. (eg the EAR agreement with the EU).

In particular, it regulates:

a) the mutual agreement procedure aimed at avoiding taxation not in accordance with the applicable double taxation agreement;

b) withholding tax relief;

c) the penalties applicable to offenses relating to taxes levied at source on capital income.

With regard to withholding tax relief, the Federal Tax Administration is competent to carry out the procedure for withholding tax relief based on a CDI (art. 24 al. 1 LECF).

This applies both to reimbursement requests made by legal persons and to those made by natural persons domiciled abroad.

The right to reimbursement of withholding tax ceases if the request is not submitted within three years after the end of the calendar year during which the taxable benefit is due (art. 27 al. 1 LECF ).

If the withholding tax is only paid and transferred following a challenge by the FTA-Bern (e.g. following the set-off of a concealed distribution of profits on the occasion of an audit of domicile) and if the period provided for in art. 27 para. 1 LECF has already expired or if less than 60 days remain between the payment of the tax and its expiry, a new period of 60 days begins to run from the date of the payment of the tax until the filing of the application.

In conclusion, art. 27 LECF incorporates the provisions of art. 32 LIA and thus specifies, in accordance with current case law, that the expiry periods provided for therein also apply to the request for reimbursement based on a CDI, unless the latter provides otherwise (art. 1 al. 3 LECF ).

Any person (natural or legal) who requests a refund of withholding tax based on a CDI must therefore do so within the same time limits as the person (natural or legal) who requests the refund based on the LIA.

The person who obtains the refund of the withholding tax without a prior decision, but based on a simple summary examination of the request, the FTA-Bern confirms the refund subject to a subsequent check of the right to refund. After a period of three years from the reimbursement, the control can only be carried out in connection with criminal proceedings within the meaning of Art. 28 LECF et seq.

For more information on the subject, we recommend that you read the article by Me Stefan Oesterhelt, Attorney,LL. M., qualified tax expert, published in the tax magazine "Steuerrevue".

In the mean time, we remain of course at your disposal for any questions you may have and please accept, dear reader, our best regards.

Javier Reyes,

Tax Partner | Co-founder DYN | TAX

Certified Tax Expert | CSI Certified Tax Expert | Certified tax expert in Swiss VAT