Swiss withholding tax refunds: beneficial ownership and tax avoidance

On 1 July 2026, the Swiss Federal Administrative Court issued a decision addressing the interaction between beneficial ownership and tax avoidance in the context of Swiss withholding tax refunds. While the Court recognised the appellant as the beneficial owner of the dividends, it nevertheless denied the refund on tax avoidance grounds.  

The dispute concerned dividends received in 2016 on shares and participation certificates of three Swiss listed companies acquired in connection with derivative transactions.

The case

First, the appellant entered into put calendar spreads. It simultaneously sold put options expiring before the dividend date and acquired matching put options for the same quantity and at the same strike price, with expiry after the dividend date. When the short puts were exercised, the appellant acquired the underlying securities before the dividend date. After receiving the dividend, it exercised the long puts and sold the securities at the same strike price. The difference between the option premiums, referred to as the debit spread, corresponded to between 74.44% and 83.95% of the gross dividend.

Second, the appellant combined a direct purchase of shares with long put options. It acquired the put options and seconds later, the corresponding shares. The strike price was substantially above the market price. After receiving the dividend, the appellant exercised the options and sold the shares at the agreed strike price. The difference between the option premium and the option’s intrinsic value corresponded to 83.7% of the gross dividend. Under both transaction types, the appellant generated a small profit only if the withholding tax was refunded.

The appellant applied for a full refund of the 35% withholding tax deducted from approximately CHF 1.65 million in gross dividends. The Swiss Federal Tax Administration refused the refund for part of those dividends, arguing that the appellant was not the beneficial owner of the dividend income and that the arrangements constituted tax avoidance. The appellant challenged this decision before the Federal Administrative Court.

Applying the Federal Supreme Court’s refined case law, the Federal Administrative Court held that the appellant was beneficially entitled to the dividends under both transaction types. In particular, the relevant amounts under the option arrangements were payable before the dividends were received and remained payable even if no dividend was ultimately distributed. The Court nevertheless denied the refund on the separate ground of tax avoidance.

The Court considered all three elements of tax avoidance to be met. First, it regarded the arrangements as unusual and economically inappropriate because they produced a profit only if the withholding tax was fully refunded. In its view, an investor without a full refund entitlement would not have entered into the same transactions. Second, it inferred that obtaining the withholding tax refund was an essential motive for the chosen structure. Third, it held that granting the refund would have resulted in a significant tax advantage.

Forvis Mazars’ view  

We agree that beneficial ownership and tax avoidance are separate tests. However, the Court’s application of the tax-avoidance doctrine is not convincing. The transactions involved standardised exchange-traded options, were executed through an anonymous order book and created binding payment obligations irrespective of whether a dividend was paid. Their pricing reflected the expected dividend and the parties’ different tax positions but this alone should not result in the transactions being considered abusive. Tax consequences are a normal element of transaction pricing.  A transaction does not become economically inappropriate merely because its profitability depends on a certain tax treatment, particularly in the context of the 35% Swiss withholding tax.  

The appellant has challenged the decision before the Federal Supreme Court. Its judgment may clarify the boundary between beneficial ownership and tax avoidance in dividend-related derivative transactions. Until then, taxpayers entering into such transactions should clearly document their pricing, risk allocation and commercial rationale, particularly where profitability depends on a full withholding tax refund.  

If you would like to discuss the implications of this decision for your transactions or withholding tax position, our tax experts are available to support you.  
 

Authors: Steven Gründel and Andrè Kuhn