Tax Treaty Case Law around the Globe 2016
1. Aufl. 2017
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S. 295Chapter 25 Switzerland: “SWAP Case” and Beneficial Ownership
Stefano Bernasconi and Michael Beusch
25.1. Introduction
In a public hearing on 5 May 2015, the Swiss Federal Supreme Court decided two long-awaited cases on beneficial ownership. The written judgments were published on 28 October 2015. The cases dealt with financial products, share transactions and withholding tax in a treaty context. They are widely seen as landmark cases regarding the question of beneficial ownership in fully hedged share transactions. The case discussed here involved total return swaps (TRS); in the other case, the focus was on “future contracts”.
25.2. Facts of the case
A TRS is a bilateral financial transaction. Two parties agree to exchange (“swap”) the total return of a single asset or basket of assets (particularly dividends and capital gains) for periodic cash flows and a guarantee against capital losses.
In the actual case, a Danish bank entered into several TRS transactions with counterparties in Germany, France, the United Kingdom and the United States. In each transaction, the bank promised to pay to the counterparty the amount of appreciation of the share price of a certain equity or basket of eq...