Forfeiture of the right to reimbursement under previous law (Art. 23 VStG)


The new Art. 23 VStG has been in force since

1 January 2019 and has fundamentally changed the conditions for withholding tax reimbursement claims. However, for withholding tax claims that arose before 1 January 2014 the old jurisdiction still applies (see 2C_397/2017 of 9 May 2019), which is explained below.


The Federal Court Decision 2C_87/2018 of 6 February 2018 concerns a married couple who stated their participation in the former C. AG in their 2014 tax return, but not the dividend distributed to them by C. AG. When the tax authorities of the Canton of Berne enquired about the tax obligations in the course of  processing the 2014 tax return, they wrote in their e-mail of 23 August 2016 that the declaration of the dividend had been omitted unintentionally. The tax administration of the Canton of Berne and the Tax Appeal Commission of the Canton of Berne therefore considered the right to reimbursement of the withholding tax to be forfeited.

In the Federal Court Decision 2C_104/2018 of 19 February 2018, taxpayer A. declared her participation in the company B. AG in her 2014 tax return, but not the dividend of CHF 50'000 she received from B. AG. Neither did she attach any documents to the tax return from which the dividend would have been evident. After the tax office of the Canton of Zurich inquired about the dividend in the course of processing the tax return, the taxpayer sent the form 103 to the tax office, which, however, concerned the 2014 financial year (with the dividend due in the 2015 tax period). The tax office of the Canton of Zurich and the Tax Appeals Court of the Canton of Zurich also considered the taxpayer's right to reimbursement of the withholding tax to be forfeited here.

In the Federal Court Decision 2C_117/2018 of 5 March 2018, a married couple declared their assets and income in their 2014 tax return and simultaneously submitted a withholding tax reimbursement claim of CHF 147'080.54, but attached an incomplete tax list of Deutsche Bank to the tax return, which only covered the period from 1 August to 31 December 2014. Only after being requested to do so by the cantonal tax office of Zurich as part of the assessment work, did the married couple submit a tax register covering the period from 1 January to 31 July 2014. The tax office of the Canton of Zurich found that income subject to withholding tax in the amount of CHF 92'404.44 (withholding tax = CHF 32'341.55) had remained undeclared. As a result, the cantonal tax office set the withholding tax refund claim at CHF 147'080.50, but refused the claim to the CHF 32'341.55. The Tax Appeals Court of the Canton of Zurich also approved this action.

Spontaneous initial or subsequent declaration required

The Federal Court ruled in favour of the cantonal tax authorities in all three cases and rejected the taxpayers' complaints. Regarding the application and interpretation of Art. 23 VStG, it will continue to adhere to its long-standing practice: A natural person's right to reimbursement of the withholding tax is forfeited if the taxable person does not spontaneously declare the income subject to withholding tax in the next tax return after the due date of the benefit or at least spontaneously supplements the tax return submitted so early that the income can be taken into account by the assessment authority before the final assessment. The direct tax cooperation obligation therefore requires a spontaneous initial declaration in the tax return or at least a spontaneous subsequent declaration. However, if the declaration is only made following an intervention by the assessment authority, the taxpayers can rightly be accused of carelessness contrary to their obligations or at least of negligent conduct, which is sufficient to reject the claim to reimbursement.

No obligation to investigate for the tax authorities

In all three rulings, the taxpayers attempted to argue with the help of the Federal Court Decision 2C_637/2016 of 17 March 2017 that, in the case of a small clarification effort, the assessment authority had a duty to investigate, which would push back forfeiture. However, the Federal Supreme Court clearly denied this in the aforementioned cases. In ruling 2C_637/2016, it was decisive that the assessment authority was able to conclude the existence and amount of the dividend on the basis of a document enclosed with the tax return without further effort. In 2C_87/2018 and 2C_104/2018, however, no documents were attached to the tax return and in 2C_117/2018 a tax register of Deutsche Bank was attached, but this was incomplete, so that inquiries about the first seven months of 2014 were unavoidable on the part of the assessment authority. A «spontaneous» declaration within the meaning of Art. 23 VStG could therefore not be attained here either. Moreover, the legal equality is not infringed if, unlike in other cantons, no documents have to be submitted with the tax return in the Canton of Berne and, consequently, the assessment authorities can't extrapolate a missing statement in the declaration from the documents.

The argument that the declaration would not have changed the final tax burden is also insufficient, since Art. 23 VStG is not linked to the success of the tax reduction, but purely to the behaviour of failing to report.

Revision of Art. 23 VStG

In 2C_87/2018 and 2C_104/2018 the taxpayers referred to the intended revision of Art. 23 VStG, which provides for certain reliefs and is to be apply retroactively. Nevertheless, the Federal Supreme Court must apply the withholding tax law in the present cases as it was applicable when the taxable benefit was due, i.e. Art. 23 VStG in the original version of 13 October 1965.

Exaggerated formalism

Supreme Court to be rather exaggerated formalism, which was also criticised in 2C_117/2018, they must be aware that the duty to declare within the meaning of Art. 23 VStG is very important for our tax system. It is therefore essential that in tax law, as a typical area of mass administration, the tax authorities can assume that the tax returns are submitted correctly and in full. In the face of this flood of information, it would be disproportionate to demand an additional duty of investigation from them. As the Federal Supreme Court emphasizes, Art. 23 VStG does not serve a mere end in itself and does not impede the realisation of substantive law in an untenable manner, but, on the contrary, serves our legitimate interest in a lawful tax collection. 

Final remark

Even if the fulfilment of tax liability is considerably facilitated today with the help of the Internet and the electronic recording of tax data in the tax return, all electronic aids are of little use if the preparatory work for the tax return, namely the collection and organisation of all receipts and information, is insufficient. The computer-aided recording of tax data does not release you from a clean organization of documents and systematic collection of the necessary receipts - preferably continuously and during the year. If this is not done, missing information and documents may, among other things, entail the risk of forfeiting a right to reimbursement, as in the present cases. With the revision and the new Art. 23 para. 2 VStG, the legislator has now made a small concession to taxpayers. As long as one negligently (i.e. not intentionally) fails to declare something and the dividends are declared or added by the tax authorities before the assessment procedure has been legally completed, one is off the hook and entitled to a refund. Read more

Further new Federal Court Decisions on the same subject: 2C_612/2017 of 7 May 2018, 2C_580/2018 of

10 July 2018., 2C_56/2018 of 5 October 2018, 2C_397/2017 of 9 May 2019.