Context
Switzerland’s anticipatory withholding tax (impôt anticipé / Verrechnungssteuer) applies to dividends, interest on bonds, and certain other income. Crucially for FTTP practitioners, it also applies to ‘prestations appréciables en argent’ (hidden distributions / verdeckte Gewinnausschüttungen) — any benefit that a Swiss company confers on a related party without adequate consideration, motivated by the participatory relationship. When a Swiss entity pays excessive intercompany interest, the excess is a hidden distribution. It is subject to 35 per cent anticipatory WHT, which must be declared spontaneously to the AFC on the same basis as dividends.
The Swiss WHT regime operates on a self-declaration basis. Unlike many other tax obligations, the taxpayer is not assessed — it must identify the liability and declare it proactively. Failure to do so is not merely a civil compliance failure: it is a criminal offence under Swiss federal administrative criminal law (DPA). This case is the first in the ajiho library to involve a personal criminal conviction arising from an FTTP issue.
The facts
B. SA is the Swiss operating subsidiary of an international retail group, operating branded stores at multiple Swiss sites. In April 2011, the UK group entity D. Ltd lent B. SA CHF 93m at 3.15 per cent per annum for five years.
In July 2014, the cantonal tax authority (VD) flagged the intercompany loan rate as potentially excessive during a review of B. SA’s accounts for 2010–2012. B. SA’s auditors (C. SA) commissioned a transfer pricing study in November 2014 to demonstrate that 3.15 per cent was arm’s length. The cantonal authority rejected that study in December 2014 and proposed a compromise rate of 2.5 per cent for 2011–2016, which B. SA accepted in January 2015. The difference between 3.15 per cent and 2.5 per cent on CHF 93m represented a hidden distribution on which anticipatory WHT should have been declared.
A. was B. SA’s business controller and the person responsible for its tax filings. From at least July 2014, he was aware of the WHT risk: he was the point of contact with the cantonal authority, was involved in commissioning the TP study, and received the AFC’s audit findings in 2015. Despite this knowledge, when the AFC conducted its own audit and identified CHF 4.3m in hidden distributions across 2011–2015 (WHT of CHF 1.5m), A. had not spontaneously declared these amounts. The AFC opened a criminal investigation and ultimately fined A. CHF 8,000 for withholding tax evasion by conditional intent (dol éventuel) for the 2014 fiscal year.
The decision
A. challenged his conviction before the Federal Court on four grounds: (1) the cantonal appeal court should not have admitted the AFC’s appeal against his acquittal; (2) his right to be heard was violated by written rather than oral procedure; (3) the principle of ne bis in idem was violated because the AFC’s May 2016 WHT assessment had already settled the matter; and (4) the AFC had given him a legitimate expectation that no criminal proceedings would follow.
The Federal Court rejected all four grounds. The most substantive point was on ne bis in idem and the good faith argument: the AFC’s 2016 assessment concerned the civil/administrative recovery of the WHT owed. It expressly reserved the question of criminal proceedings and was explicitly limited to the ‘perception d’impôt anticipé’ (collection of WHT). It gave no assurance — express or implicit — that criminal liability was excluded. The settlement of the corporate tax position did not discharge individual criminal liability.
On personal liability, the Federal Court confirmed that under Art. 6(1) DPA, criminal liability in tax matters extends to individuals acting in the management of a company, including those without autonomous decision-making power who carry out execution tasks. A. was not a mere instrument of his superiors: he signed accounts, prepared tax returns, co-signed them after approval, and was the AFC’s contact throughout the audit. He was personally responsible for the spontaneous WHT declaration. Knowing of the issue and failing to declare was sufficient for conditional intent.
ajiho commentary
The spontaneous declaration obligation — a distinctive Swiss feature
Most FTTP practitioners are aware that non-arm’s length intercompany loan interest can produce a corporate tax adjustment. The Swiss dimension this case adds is that the same excess interest also triggers a WHT obligation on a self-declaration basis — and that obligation attaches personally to the individual who is responsible for filing and who knows of the issue. The corporate tax adjustment and the WHT liability are separate. Settling one does not settle the other.
This matters particularly for groups that negotiate TP adjustments with cantonal authorities — as B. SA did here, agreeing a compromise rate with the VD cantonal authority in January 2015. That negotiation resolved the cantonal income tax position. It did not resolve the federal WHT position. Both layers need to be addressed, and the WHT layer requires spontaneous proactive declaration to the AFC, not just a response to an audit.
Personal liability for tax professionals
The conviction of A. should be read carefully. He was not convicted because the TP analysis was wrong or because the rate exceeded the arm’s length threshold. He was convicted because he knew of the issue — had been involved in the cantonal proceedings, had commissioned the TP study, had received the AFC’s audit findings — and did not declare spontaneously. Conditional intent (dol éventuel) does not require the deliberate decision to evade: it is sufficient that the person recognised the substantial risk that WHT was due and accepted that risk by doing nothing.
For in-house tax teams and senior tax professionals with Swiss responsibilities, the lesson is direct: when a TP issue is identified that may produce a hidden distribution, the WHT disclosure obligation must be considered and acted on separately from the income tax position. Involvement in a negotiation with the cantonal authority about the appropriate rate is not a substitute for spontaneous declaration to the AFC. And corporate settlement of the WHT assessment does not extinguish personal criminal liability for earlier non-disclosure.
What this means for your business
Groups with Swiss operating entities borrowing from related parties should treat the WHT dimension of any intercompany interest arrangement as a distinct workstream from the corporate income tax position. Where a rate is challenged or adjusted — whether through audit, negotiation, or self-review — the excess over arm’s length is a hidden distribution that must be spontaneously declared to the AFC for anticipatory WHT purposes.
The individual responsible for the Swiss filings carries personal exposure. Where a known TP or WHT issue is left undeclared, that individual — not only the company — can face criminal liability. The practical safeguard is to ensure the spontaneous declaration obligation is discharged as soon as a hidden distribution is identified, and documented as having been discharged.
Case reference
A. v Administration fédérale des contributions (AFC) · Tribunal fédéral, Ire Cour de droit pénal · 6B_90/2024 · 3 February 2025
Judgment in French. Available on the Swiss Federal Court portal (bger.ch / relevancy.ch). B. SA identity anonymised throughout.