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Long wait for Swiss WHT refunds affecting market values
11 August 2011
Financial institutions claiming refunds of Swiss withholding tax on dividends have only received further requests for information. This has led to anxiety and reduced market values, writes Charles Hermann, tax partner at KPMG Zurich and Geneva
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Switzerland
withholding tax
Charles Hermann
KPMG
It all started in 2005 when a Swiss bank bought some very large positions in Swiss shares from non-Swiss resident counterparties a couple of days before the dividend payment.
At the same time the Swiss bank entered into a delta one call & put arrangement with the same counterparties. Shortly after the dividend payment, the options were exercised and the Swiss bank returned the shares to the foreign counterparties.
These transactions generated a withholding tax (WHT) enhancement for the Swiss bank and the non-Swiss resident counterparties, since the Swiss bank was in a position to obtain a full refund of the 35% WHT on the dividends, whereas the non-Swiss resident counterparties would only have been entitled to receive 85% or 65% of the gross dividend income (depending on whether the counterparties were able to benefit from a partial relief on the tax under a Swiss treaty).
The Swiss tax authorities...
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