A. AG v Federal Tax Administration

2C_219/2024

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A. AG
v Federal Tax Administration

Court:

Judge: Federal Judge Aubry Girardin President, Federal Judge Donzallaz, Federal Judge Hanni, Clerk of the Court Zollinger

Hearing date: 8 May 2024
Judgment date: 8 May 2024

Lausanne

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Parties to the proceedings
A. _____________ AG,
Appellant,
represented by attorney Prof. Dr. René Matteotti,

v.

Swiss Federal Tax Administration,
Service for Exchange of Information in Tax Matters SEI,
Eigerstrasse 65, 3003 Bern.

Matter
Administrative assistance (DTA CH-AUS),

Appeal against the judgment of the Federal Administrative Court, Division I, of 11 April 2024 (A-1319/2023).

Facts of the case:

A.

Based on Art. 25 of the Agreement of 30 July 2013 between the Swiss Confederation and Australia for the Avoidance of Double Taxation with Respect to Taxes on Income (DTA CH-AU; SR 0.672.915.81), the Australian Taxation Office (hereinafter: requesting authority) requested information concerning B. _____ C. ______ and D. _____ from the Swiss Federal Tax Administration (SFTA) by letter dated 24 March 2022.A. _________ AG, based in U. ______ (Canton of Basel-Landschaft), was named as the information holder.

The requesting authority stated that it was currently conducting an investigation into the tax years 2016/17 and 2017/18 concerning the three Australian companies. B. ______ was the main company of an income tax consolidated group to which C. _______ and D. _______ also belonged. B. ______, which operated franchise branches in Australia, had a significant decline in profitability in the tax years 2016/17 and 2017/18. The products sold by B. were mainly purchased from A. ______ AG. In 2016, A.__________ was restructured. The commercial and financial relationships between B. _______ and A. _______ AG were investigated to determine whether B. _________ had achieved a transfer pricing advantage through the incorrect application of the arm's length principle in the transactions with A. ______ AG.

B.

In its final ruling of 2 February 2023, the SFTA recognised that the requesting authority was entitled to administrative assistance to be provided regarding B. ______, C. ______ and D. ________ and that the requested information was to be transmitted.

The appeal lodged by A. __________ AG against the final ruling of 2 February 2023 was rejected by the Federal Administrative Court in its ruling of 11 April 2024 (served on 18 April 2024).

C.

With an appeal in public law matters dated April 29, 2024, A. _______ AG is appealing to the Swiss Federal Supreme Court. It requested that the ruling of 11 April 2024 be set aside and that administrative assistance be refused to the requesting authority.

Considerations:

1

The Federal Supreme Court examines its jurisdiction and the other requirements for entering an appeal ex officio

(Art. 29 para. 1 BGG [Bundesgerichtsgesetz, Swiss Federal Supreme Court Act) and with full powers of judicial review (see BGE [Bundesgerichtsentscheidung, Swiss Supreme Court Ruling] 147 I 89 E. 1; 146 II 276 E. 1).

1.1 Art. 83 lit. h BGG provides that appeals to the Federal Supreme Court against decisions in the area of international administrative assistance are inadmissible, with the exception of administrative assistance in tax matters. An appeal against a decision in the area of international administrative assistance in tax matters is admissible pursuant to Art. 84a BGG if a legal question of fundamental importance arises or if it is a particularly important case within the meaning of Art. 84 para. 2 BGG for other reasons. The appealing party must explain in the statement of grounds why the respective requirement is met unless this is very obvious (Art. 42 para. 2 BGG; see BGE 146 II 276 E. 1.2.1; 139 II 340 E. 4).

The existence of a legal question of fundamental importance is regularly to be affirmed if the decision can be determinative for practice - namely, if many similar cases are to be judged by lower courts. A legal question of fundamental importance may also be assumed under certain circumstances if it is a question that is being assessed for the first time and requires clarification by the Federal Supreme Court. However, it must be a legal question whose decision calls for clarification by the highest court due to its weight. However, a question of law that has already been decided by the Federal Supreme Court can also be of fundamental importance if a new review is required (see BGE 139 II 404 E. 1.3; 139 II 340 E. 4; judgment 2C_108/2024 of 21 February 2024 E. 1.1).

1.2 The Appellant submits to the Federal Supreme Court the question of whether administrative assistance should be granted if a request for administrative assistance concerns the review of the appropriateness of compensation, although it has been established that the companies concerned are not affiliated in terms of capital pursuant to Art. 9 DTA CH-AU and therefore a tax correction of the amount of compensation would be contrary to the agreement. The Appellant takes the view that the treaty law supersedes the national tax standards. As a result, no information is to be exchanged for taxation in accordance with national law if this contradicts the double taxation agreement. The Federal Supreme Court has not yet ruled on this issue.

1.3 Art. 9 DTA CH-AU reads as follows:

1. Where:

a)

an enterprise of a Contracting State participates directly or indirectly in the management, control or capital of an enterprise of the other Contracting State, or

b)

the same persons participate directly or indirectly in the management, control or capital of an enterprise of a Contracting State and an enterprise of the other Contracting State;

and in either case conditions operate between the two enterprises in their commercial or financial relations which differ from those which might be expected to operate between independent enterprises, then any profits which would, but for those conditions, have accrued to one of the enterprises, but, by reason of those conditions, have not so accrued, may be included in the profits of that enterprise and taxed accordingly.

(2) Where a Contracting State includes in the profits of an enterprise of that State - and taxes accordingly - profits on which an enterprise of the other Contracting State has been charged to tax in that other State and the profits so included are profits which might have been expected to have accrued to the enterprise of the first-mentioned State if the conditions operative between the enterprises had been those which might have been expected to have operated between independent enterprises dealing wholly independently with one another, then that other State shall make an appropriate adjustment of the amount of the taxes charged therein on those profits.

In determining such adjustment, due regard shall be had to the other provisions of this Convention and the competent authorities of the Contracting States shall if necessary consult each other.

1.4 The legal question raised by the Appellant in the context of the review of transfer prices and Art. 9 DTA CH-AU essentially concerns the requirement of likely relevance and the trust principle under international law.

1.4.1 The Federal Supreme Court has already ruled on various occasions on the review of transfer prices in the context of international administrative assistance in tax matters (see BGE 143 II 185 E. 2 et seq.; judgments 2C_282/2021 of 15 June 2022 E. 1.2.2; 2C_455/2021 of 31 May 2022 E. 1.2.2). The Federal Supreme Court has held that the requested information meets the requirement of likely relevance if the requesting authority aims to apply the internal transfer pricing regulations of the requesting state (see judgments 2C_481/2021 of 19 May 2022 E. 7.5 ["The transfer pricing applied for the purposes of enforcing its domestic tax legislation"]; 2C_690/2015 of 15 March 2016 E. 3.3 ["The application of the requesting State's domestic transfer pricing rules"]). This consideration is in line with the established case law of the Federal Supreme Court, according to which the requested state does not have to comment on the domestic tax and procedural law of the requesting state in the context of administrative assistance proceedings. Rather, it is sufficient for the likely relevance that the requested information appears to be potentially suitable for use in foreign proceedings (see BGE 144 II 206 E. 4.3; judgment 2C_109/2022 of 30 January 2023 E. 4.2.1). The lower court also considers that the requested information would serve the requesting authority in the application of the domestic transfer pricing regulations (see E. 4.2.2.3 f. of the contested judgment). The Appellant does not argue that the requested information is not suitable for this taxation purpose. Consequently, there is no legal question of fundamental importance within the meaning of Art. 84a BGG. Insofar as the Appellant argues that it is not affiliated in terms of capital with the persons affected by the administrative assistance, this circumstance, as the Federal Supreme Court has stated in its established case law, must be submitted before the authorities of the requesting state (see BGE 144 II 206 E. 4.6; 142 II 161 E. 2.2; 142 II 218 E. 3.6 f.; judgment 2C_241/2016 of 7 April 2017 E. 5.4).

1.4.2 Furthermore, it follows from the principle of trust under international law that the requested state must, in principle, rely on the information provided to it by the requesting state (on the trust principle under international law, see BGE 146 II 150 E. 7.1; 144 II 206 E. 4.4). In the present matter, the lower court considers that it cannot be inferred from the requesting authority's reference in the request for administrative assistance of 24 March 2022, according to which its domestic law allows the application of the arm's length principle to transactions between affiliated and non-affiliated companies, that the requesting state is aiming at taxation contrary to the agreement (see E. 4.2.2.4 of the contested judgment). Insofar as the Appellant criticises this consideration and points out that there is an undisputed lack of capital affiliation, it is merely directed against the lower court's application of the principle of trust under international law in the present individual case and does not raise a question of principle within the meaning of Art. 84a BGG.

1.5 According to the above, the question raised by the Appellant concerns the substantive assessment of the matter in the context of the French tax proceedings and is directed against the application of the internal transfer pricing rules there. Furthermore, a possible conflict with Art. 9 DTA CH-AU due to potential future taxation by the requesting state is not to be clarified within the framework of the administrative assistance procedure but directly between the two contracting states (cf. Art. 24 DTA CH-AU). Insofar as the Appellant raises the issue of future taxation contrary to the agreement, there is, therefore, also no legal question of fundamental importance within the meaning of Art. 84a BGG. As a result, the appeal in public law matters must be dismissed.

2.

In accordance with this outcome of the proceedings, the Appellant shall bear the court costs (Art. 66 (1) BGG). No party compensation is owed (Art. 68 (1) and (3) BGG).

Accordingly, the Federal Supreme Court finds:

1. The appeal in public law matters is dismissed.
2. The court costs of CHF 3,000 are imposed on the Appellant.
3. The parties to the proceedings and the Federal Administrative Court, Division I, will be notified of this judgment.

Lausanne, 8 May 2024

On behalf of the Il. Public Law Division of the Swiss Federal Supreme Court

The President: F. Aubry Girardin

The clerk of the court: M. Zollinger