#1. Legislative History

No. 1 Art. 132 FC is the constitutional basis for the levying of stamp duties and withholding tax by the Confederation. The provision goes back to the total revision of the Federal Constitution of 1999 and substantively adopts the predecessor provisions of the old FC of 1874. Art. 41bis of the old FC already formed the basis for the initial introduction of stamp duties in 1917 to finance national defence during the First World War.

No. 2 Withholding tax was introduced in 1944 as a defence tax and received its current constitutional basis in Art. 41ter of the old FC. The Message on a new Federal Constitution of 20 November 1996 (BBl 1997 I 1, 374) stated that Art. 132 FC continues the Confederation's existing competences in the area of stamp duties and withholding tax unchanged. The Federal Council had originally proposed continuing the competence to levy a retaliation tax, which however was not adopted.

#2. Systematic Classification

No. 3 Art. 132 FC is found in Title 3 (Confederation, Cantons and Communes), Chapter 3 (Financial System) of the Federal Constitution. The provision grants the Confederation exclusive legislative competence for the levying of stamp duties and withholding tax. It stands in systematic connection with Art. 134 FC (exclusion of cantonal and communal taxes) as well as Art. 196 No. 16 FC (transitional provision on the redesign of fiscal equalisation).

No. 4 The norm supplements the general financial competences of the Confederation under Art. 126 ff. FC and forms, together with Art. 128 FC (direct federal tax) and Art. 130 FC (value added tax), the core of the Confederation's own tax sources. The literature emphasises the federal dimension: While para. 1 grants the Confederation exclusive competence, para. 2 sentence 2 secures the cantons a fixed share of 10% of withholding tax revenue.

#3. Elements of the Offence / Normative Content

#Stamp Duty (Para. 1)

No. 5 The term «stamp duty» encompasses, according to the prevailing doctrine, three types of levies: the issuance duty, the transfer duty and the duty on insurance premiums (Oberson/Hinny, StG Commentary, Intro. No. 1 ff.; Zweifel/Beusch/Bauer-Balmelli, StG Commentary, § 1 No. 5). The constitutional text exemplarily mentions «securities», «receipts for insurance premiums» and «other documents of commercial transactions» as possible tax objects.

No. 6 The express exception for «documents of real estate and mortgage transactions» constitutionally excludes a federal stamp duty on real estate transactions. This matter remains reserved to cantonal tax sovereignty (→ Art. 3 FC). The exception covers both purchase contracts for real estate as well as the creation of mortgage rights (Art. 965 ff. OR, Art. 875 CC).

#Withholding Tax (Para. 2)

No. 7 Withholding tax can be levied on three categories of income: «income from movable capital assets», «lottery winnings» and «insurance benefits». The concept of movable capital assets encompasses, according to case law, in particular dividends, interest and similar income (BGE 141 II 447). Some commentators point out that the constitutional concept is to be understood broadly and leaves the legislature considerable room for design.

No. 8 The constitutionally guaranteed cantonal share of 10% of tax revenue represents a federal peculiarity. This share is due to the cantons without further requirements and is distributed according to resident population (Art. 2 of the Ordinance on the Cantonal Share of Withholding Tax).

#4. Legal Consequences

No. 9 Art. 132 FC establishes exclusive federal competence. The cantons are excluded from any legislation in the area of stamp duties and withholding tax (→ Art. 134 FC). This competence is optional: the Confederation «may» levy the mentioned taxes, but is not constitutionally obligated to do so.

No. 10 Withholding tax primarily serves a security purpose (Bauer-Balmelli, Der Sicherungszweck der Verrechnungssteuer, pp. 45 ff.; Pfund, Verrechnungssteuer I, p. 12). The literature distinguishes between the fiscal purpose (definitive taxation of foreign recipients) and the control purpose (ensuring proper declaration by domestic recipients). The Federal Court has repeatedly confirmed this dual purpose (Judgment 2C_85/2015).

No. 11 The exercise of competences under Art. 132 FC is subject to general constitutional limitations, in particular the principle of equality before the law (→ Art. 8 FC), the principle of proportionality (→ Art. 5 para. 2 FC) and the prohibition of inter-cantonal double taxation (→ Art. 127 para. 3 FC).

#5. Controversial Issues

No. 12 In doctrine, the scope of federal competence for new financial instruments is disputed. While Oberson, Droit fiscal suisse, § 19 No. 15, advocates for an evolutionary interpretation of the term «securities», Blumenstein/Locher, System des schweizerischen Steuerrechts, p. 234, argue for a restrictive interpretation given the exceptional character of federal competence.

No. 13 The abolition of the issuance duty on equity capital is controversially discussed. The National Council voted in favour of abolition as the first chamber in the spring session of 2013, while the Council of States decided in December 2013 to suspend the proposal. The Federal Council had expressed itself positively on abolition based on a FTA study on 30 November 2011. The reform ultimately failed due to divergent positions of the chambers.

No. 14 The introduction of the paying agent principle for withholding tax is intensively debated. The literature reports that the Federal Council denies an adjustment of Art. 132 para. 2 FC for the system change to the paying agent principle. The prevailing doctrine sees such a system change as a permissible exercise of existing constitutional competence (Zweifel/Beusch/Bauer-Balmelli, VStG Commentary, Intro. No. 35 ff.).

#6. Practice Notes

No. 15 When examining stamp duty questions, it must first be clarified which of the three types of stamp duty (issuance, transfer or insurance duty) is affected. The exception for real estate transactions in Art. 132 para. 1 FC is absolute and does not cover indirect real estate transactions via real estate companies (BGE 115 Ib 233).

No. 16 For the refund of withholding tax, proper declaration is central. The Federal Court has repeatedly held that even minor declaration defects can lead to forfeiture of the refund claim (Judgment 2C_1083/2014). Taxpayers should therefore be advised to strictly comply with declaration obligations.

No. 17 In cross-border situations, the applicability of double taxation agreements must be examined. The criterion of «beneficial ownership» is of central importance (BGE 141 II 447). Treaty-shopping structures are increasingly critically examined by the tax administration and courts.

#Caselaw

#Issue duty (Art. 132 para. 1 Const.)

Constitutional foundations and judicial organisation

BGE 149 II 462 of 7 September 2023 Decisions of the Federal Administrative Court concerning remission of the issue duty are final instance. The Federal Court confirmed its limited jurisdiction in stamp duty remission decisions and specified the constitutional limits of the issue duty.

«Decisions of the Federal Administrative Court concerning remission of the issue duty are final instance; they cannot be contested before the Federal Court either by appeal in public law matters or by subsidiary constitutional appeal.»

Scope of application for public law corporations

BGE 115 Ib 233 of 1 January 1989 The federal stamp duty legislation also applies to joint stock companies under cantonal law. This landmark decision defined the broad scope of application of federal legislation based on Art. 132 para. 1 Const.

«Joint stock companies under cantonal law are subject to federal stamp duty legislation, in particular Art. 5 para. 1 lit. a SDA.»

Restructuring exemption and loss elimination

BGE 149 II 462 of 7 September 2023 The issue duty exemption of CHF 10,000,000 requires the actual write-off of existing losses at the time of the restructuring measure. This latest case law specifies the constitutional requirements for stamp duty relief.

«The issue duty exemption of CHF 10,000,000 requires in accounting terms the actual write-off of existing losses (material element). This must occur at the time when the restructuring measure is to be recorded (temporal element).»

#Withholding tax (Art. 132 para. 2 Const.)

Constitutional foundations

Judgment 2C_377/2009 of 9 September 2009 The Confederation levies a withholding tax on the income from movable capital assets based on Art. 132 para. 2 Const. The Federal Court confirmed the constitutional foundation of the withholding tax and its systematic classification.

«The Confederation levies a withholding tax based on Art. 132 para. 2 Const., in particular on the income from movable capital assets (Art. 1 para. 1 of the Federal Act of 13 October 1965 on Withholding Tax [WTA; SR 642.21]).»

Refund entitlement and beneficial ownership

BGE 141 II 447 of 1 January 2015 Effective beneficial ownership is decisive for the refund of withholding tax to foreign recipients. The decision developed criteria for the constitutional application of double taxation agreements.

«Effective beneficial ownership (and thus the refund of Swiss withholding tax to a Danish bank) must be denied if the applicant receives the dividend distributed by a Swiss company but must pass on these income due to contractual performance obligations or actual restrictions existing at the time of payment.»

Tax avoidance in share buybacks

Judgment 2A.660/2006 of 8 June 2007 Complex structures with call warrants in the buyback of treasury shares may constitute tax avoidance. The Federal Court examined the limits of permissible tax planning regarding the constitutionally anchored withholding tax.

«Tax avoidance is assumed according to consistent Federal Court jurisprudence if (a) a legal structure chosen by the parties appears unusual (insolite), inappropriate or strange, or at least completely inadequate to the economic circumstances.»

De facto liquidation and discretionary assessment

Judgment 2C_502/2008 of 18 December 2008 In case of de facto liquidation of a company, the withholding tax may be assessed at discretion. The decision specified the enforcement of constitutional taxation claims in case of lack of cooperation.

«The Confederation levies a withholding tax based on Art. 132 para. 2 Const., namely on the income from movable capital assets (Art. 1 para. 1 of the Federal Act of 13 October 1965 on Withholding Tax [WTA; SR 642.21]). According to Art. 4 para. 1 lit. b WTA, the subject of withholding tax on income from movable assets includes interest, annuities, profit shares and other income.»

Commercial justification of payments

Judgment 2C_377/2009 of 9 September 2009 Payments to affiliated companies are only subject to withholding tax if they are based on the participation relationship. The judgment delimited the scope of application of the constitutional authorisation for withholding tax.

«The payments from A.________ to B.________ Ltd. were correctly regarded by the lower instance as commercially justified. The proof that these were benefits in money's worth based on the participation relationship to a person close to the economically entitled person in A.________ was not provided.»

Refund and declaration obligation

Judgment 2C_85/2015 of 16 September 2015 Proper declaration is a prerequisite for the refund of withholding tax. The decision emphasised the security purpose of the constitutionally anchored withholding tax.

«In domestic relationships, the withholding tax primarily serves to secure the declaration of income from movable capital assets; it is refunded by the Confederation to the tax-honest taxpayer.»

Forfeiture of refund entitlement

Judgment 2C_1083/2014 of 20 November 2015 Incomplete declaration may lead to forfeiture of the refund entitlement. The judgment specified the legal consequences of violating constitutionally founded cooperation obligations.

«The withholding tax is refunded to the recipient of the benefit reduced by the tax by the Confederation in accordance with the law (Art. 1 para. 2 in conjunction with Art. 30 WTA). The refund entitlement is forfeited if the taxable benefit is not properly declared.»

#Cantonal share (Art. 132 para. 2 Const.)

Judgment 2C_557/2010 of 4 November 2010 Ten percent of the withholding tax revenue constitutionally falls to the cantons. The Federal Court confirmed the federalist component of the withholding tax as an emanation of the constitutional provision.

«Ten percent of the tax revenue falls to the cantons (Art. 132 para. 2 Const.).»