The Norwegian parent company Elopak ASA received dividends of approximately NOK 200 million in each of the years 2010 and 2014 from its Swiss subsidiary. Up to and including 2009, the subsidiary was taxed in Switzerland under specially favourable rules (an effective tax rate of around 10 per cent), but from 2010 the company chose to be taxed under the ordinary Swiss tax rules (an effective tax rate of around 20 per cent).
The Norwegian tax authorities disregarded the company’s choice and imposed tax on the dividends on the basis that Switzerland was considered a low-tax jurisdiction.
The Supreme Court upheld the State’s position. In line with established case law, the assessment of whether Switzerland qualifies as a low-tax jurisdiction must be based on the effective tax level in Switzerland for a company typical of the relevant industry. Atypical choices made by the company must therefore be disregarded.
Two justices dissented, taking the view that the dividends were not taxable. These judges placed particular emphasis on the wording of the Tax Act.
The Supreme Court unanimously held that the EFTA Convention does not require the dividends to be exempt from tax. According to the Court, the relevant provisions of the Convention must be interpreted differently from the corresponding rules in the EEA Agreement.
The case clarifies the content of the concept of a “low-tax jurisdiction” under Norwegian tax law and the interpretation of the EFTA Convention.
Source: Supreme Court
Atle Melø
amelo@melo.no
+47 951 80 979
