On May 5 2015 the Federal Supreme Court rendered its
long-awaited decision on a withholding tax reimbursement claim
related to total return swaps.
Facts
A Danish bank entered into swap contracts with clients in
England, France, Germany and the United States. Pursuant to these
agreements, the clients undertook to trade the entire return
(particularly dividends and capital gain) of a specific underlying
asset (in this case, a basket of Swiss shares) against a fixed
stream of payments. In consideration of this total return swap, the
Danish bank was entitled to a variable interest (London Interbank
Offered Rate) and a margin. This allowed the clients to build up a
synthetic stake in an underlying asset (basket of Swiss shares)
without having to invest directly in the related basket of shares.
The Danish bank hedged its obligations arising under the total
return swap (ie, payment of the aggregate return at a particular
due date) by purchasing the related basket of Swiss
