Overview of the tax law decisions of the Swiss Federal Supreme Court published in the week from 21 to 27 October 2019.

  • Judgment of 26 September 2019 (2C_1058/2018): Real estate gains tax (St. Gallen). For the assessment of the real estate gains tax, costs for environmental work and excavation work must be taken into account. The cantonal self-usage rebate was rightly denied in this case, as the deceased were not subject to real estate gains tax as a result of tax-suspended disposals and were therefore not entitled to a tax rebate. Partial approval of the taxpayers' complaint and rejection to lower instance.
  • Judgment of 13 September 2019 (2C_274/2019): State and municipal taxes 2014 (Zurich and Nidwalden); intercantonal double taxation in the event of transfer of registered office. "According to federal court rulings, a taxpayer forfeits the right to challenge the assessment of a canton if he unconditionally acknowledges his tax liability there in full knowledge of the conflicting tax claim of another canton, for example by expressly or implicitly submitting to the assessment, submitting the tax return, waiving an objection or other legal remedies and paying the assessed tax amount. The forfeiture can also result from the fact that the obligor does not comply with his duty to cooperate in the assessment procedure, e.g. if he does not submit the required tax return, the balance sheet and income statement as well as the supporting documents of his bookkeeping or refuses other information necessary for the assessment and the elimination of the tax factors, so that the discretionary assessment must be carried out [...]" (E. 4.1.). At the end of 2013, the taxable person lodging the complaint moved its statutory seat from the Canton of Zurich to the Canton of Nidwalden, although in Nidwalden it was only a "letterbox domicile". The complainant was by no means able to prove to what extent the management had also been transferred to the canton of Nidwalden and consequently could not refute a pure "mailbox domicile". Rejection of the complaint against the Canton of Zurich. Furthermore, the taxpayer has forfeited his rights to challenge the assessment made in the canton of Nidwalden (in advance).
  • Judgment of 16 September 2009 - 2011 (2C_273/2019): State and municipal taxes 2015-2018 (Zurich); tax protection. In the present case, the complainants are a married couple who had to guarantee an amount to cover state and municipal taxes. The couple complained that the seizure was not justified. The Federal Supreme Court recalled that the final decision on the freezing order was a final decision, but also a decision on a precautionary measure under Art. 98 FSCA. Therefore, the BGer's power of review was limited to the question whether the contested decision infringed constitutional rights. The BGer dismissed the complaint: They were unable to assert any arbitrariness against the determination of the financial circumstances which had become unbalanced, the at least uncertain income situation and the legal transactions with which the complainants sold assets and shares to family members. According to the Federal Supreme Court, however, these circumstances proved to be "unquestionably sufficient (more than) sufficient to confirm the assumed tax risk".
  • Judgment of 27 September 2019 (2C_534/2018): Direct federal tax and state and municipal taxes 2012 (Basel-Landschaft). In the case of self-employment, costs justified by business or professional reasons can be deducted, in particular also losses incurred and booked on business assets. On the other hand, losses on private assets are not tax-deductible. In the case of self-employment, any surpluses in production costs are also deductible, which was not recognised by the previous instance. The lower court also left it open whether there was self-employment, which did not answer a legally relevant question for the Federal Supreme Court. In addition, the Federal Supreme Court had to decide whether costs imposed on the complainants in cantonal court proceedings should be allowed to be deducted as asset management costs. On this point, the Federal Court comes to the conclusion that the court costs of interest in the present case are neither directly nor indirectly related to the taxable income of the complainants from movable private assets. Partial approval of the complaints: The case is referred back to the previous instance in order to clarify whether the complainant was self-employed. In any event, the complaints are dismissed.
  • Judgment of 1 October 2019 (2C_321/2019): State and municipal taxes 2014 (Schwyz); property taxes; the complainants were shareholders of a real estate company; the lower court had based the valuation of the condominium ownership units belonging to the real estate company on the market value determined in accordance with the comparative value method and had not objected to the capitalised earnings value as it had been objected to by the complainants; according to the Federal Supreme Court, Circular No. 28 of the SSK do not exclude a determination of the market value according to the comparative value method; it is therefore not objectionable that the previous instance used the market value determined according to the comparative value method to determine the share value of the real estate company; rejection of the complaint of the taxpayers.
  • Judgment of 20 June 2019 (2C_689/2018): Tax sovereignty from 1 January 2011 (Zurich and Schwyz); 3rd course of law. The complainant is domiciled in Freienbach, Schwyz. He works as a doctor in shoulder surgery. According to his entry in the Commercial Register, he is Chairman of the Board of Directors of Z. AG, a medical services provider based in Freienbach, Schwyz. In addition to his work as a private physician at X. ag, based in Pfäffikon, Schwyz, he also works as a surgeon at the Y Clinic in Zurich. According to the Federal Supreme Court, the activity as an accredited general practitioner can generally be exercised as an employed or self-employed gainful activity (E. 4.2.1). In the pre-instance proceedings, the complainant had asserted that he had been practicing as a doctor since the establishment of Z. AG as an employed person both in an employment relationship with the Z. AG as well as in an employment relationship with X. ag. The lower court concluded that Z. AG was the sole paying agent for the complainant and that Z. AG provided its own services. AG, however, cannot be proven. The complainant himself and not his company had therefore provided the services. The Federal Supreme Court comes to the conclusion that, in the initial situation, the previous instance could assume, in conformity with federal law, that the complainant would not be entitled to the medical benefits affected by the dispute as an employee of Z. AG, but in its own name. The Federal Supreme Court further stated that because Z. AG as such could not be a service provider due to the lack of an operating permit, the complainant had to be the complainant personally. As the complainant's surgical interventions had taken place in premises provided by the clinic, no organisational measures of his own had to be taken and no capital of his own had to be used, but as an accredited attending physician, the complainant had not been involved in a relationship of dependency in terms of the organisation of work, which, taken as a whole, indicates a predominance of indications for the existence of self-employment (4.2-3). According to the Federal Supreme Court, in the present case it is sufficient for the establishment of a permanent establishment that the physician had effective access to the operating infrastructure for the performance of his duties when required, and that this could only be done after consultation and in coordination with the clinic. The previous instance rightly assumed a permanent establishment in Zurich (E. 4.4). The Federal Supreme Court affirmed that the objecti identity necessary for a prohibited double taxation between the fees for the work of the complainant as an attending physician in the Y. Clinic, which were paid to the complainant via Z. AG, and the salary which the complainant claimed to have received from Z. AG, as well as the salary which the complainant had received from Z. AG, was necessary. AG for his medical work at the Y. Clinic. On the other hand, it denied the object identity with regard to the dividend distributions which the complainant had received from Z. AG has received. Furthermore, the Federal Supreme Court rejected the plea raised by the Canton of Schwyz alleging forfeiture of the tax claim of the Canton of Zurich.
  • Judgment of 16 September 2019 (2C_510/2017): Official assessment as of 2010 (Berne); extraordinary reassessment taking into account the new photovoltaic system. The cantons are obliged under harmonisation law to include photovoltaic systems in their taxable assets. It is the canton's responsibility to recognise these as independent assets within the framework of the official valuation of real estate or the ordinary tax return procedure. The Federal legislature may, by means of an express order, declare certain expenses, such as this energy-saving measure, to be deductible property costs which have no direct relationship to the property income. It cannot be inferred from this that deductible property costs are necessarily reflected in higher property tax values or higher property income. For the latter there is no legal basis, which is why the compensation for the supply of electricity does not qualify as investment income (consequently no imputed rental value can be levied on it) but falls under the general income clause of Art. 16 (1) DBG. The Administrative Court qualified the photovoltaic installation as a movable object and not as a component of the building with regard to the official valuation of land. This is in conformity with federal law. Rejection of the complaint by the Cantonal Tax Office.
  • Judgment of 20 September 2019 (2C_152/2019): If an intercantonal real estate dealer or intercantonal general contractor sells a property of his current assets located in a canton with permanent establishments, a property-related separation of the gain in value or an exclusive allocation to the canton where the property is located must also be made. The Federal Supreme Court justifies this by stating that, in particular, even in the case of such gains in value, it is to be assumed that in cantons with a monistic system there will be separation shares which, due to tax gaps, cannot be covered by any canton if a transfer on a quota basis were to take place (E. 8.1.). In the canton where the property is located, a deduction must be made for a share of the overhead costs. In this constellation, too, the principles developed for the property dealer flat rate are applied (E. 8.2).
  • Judgment of 25 September 2019 (2C_648/2018): Real estate gains tax (St. Gallen); a one-year period for early replacement without the possibility of extension in justified exceptional cases is in line with Art. 12 para. 3 lit. E StHG (E. 5).
  • Judgment of 30 September 2019 (2C_1127/2018): Import tax, 2009 - 2014 tax periods; interest on reimbursement of unduly levied import taxes. The Federal Supreme Court concludes that the complainant cannot claim interest on the remuneration simply because she never had a claim to a refund of import taxes wrongly paid. The complainant had been able to fully claim the import taxes under her right of deduction. Neither the FCA nor the FTA require a reversal.
  • Judgment of 2 October 2019 (2C_130/2019): Direct federal tax and state and municipal taxes 2009 (Valais); "In the 2009 tax period, the complainants received (to the extent of interest here) as additions to assets the amount of CHF 80,000 and the easement relating to the parking space on the property of E.. They may have suffered a corresponding loss of property in this tax period because the complainants undertook to withdraw the action for enforcement and to establish easement on their property (concerning the toleration of the construction work carried out on the parcel of land belonging to E.). Thus, it seems conceivable in principle that an asset swap exists, i.e. that the net asset access indispensable for income taxation is lacking" (E. 4.2). The obligation to withdraw the enforcement action would not have resulted in the loss of assets if the value of the complainant's property had not been reduced by the breach of the building ban committed by his contractual partner E. before. It was therefore disputed whether there was a depreciation of the parcel due to the illegally constructed buildings. This was denied by the Federal Supreme Court with reference to the findings of the facts of the case before the court of first instance (E. 5). Rejection of the taxpayers' complaint.
  • Judgment of 2 October 2019 (2C_972/2018): Direct federal tax and state and municipal taxes 2010 and 2011 (Zurich); principle of periodicity. In order to be taken into account for tax purposes, a write-down must be made at the latest when it must be assumed in good faith that the receivable has become uncollectible. The commercial law write-off of receivables from the subsidiary (franchise fees for patent use) contradicts the principle of periodicity under tax law, in particular since the parent company was aware of the financial difficulties of its contractual partner and therefore had to be aware of the worthlessness of the receivable even before the tax periods in which the write-offs took place. Rejection of the taxpayers' complaint.
  • Judgment of 3 October 2019 (2C_509/2019): Direct federal tax and state and municipal taxes 2004-2007 (Berne); after-taxes; suspension of after-tax proceedings although the criminal tax proceedings were still pending before the Administrative Court and later before the Federal Court; the suspension of proceedings refused by the lower courts is not objectionable and the complainant is unable to get through his formal complaint. From a substantive point of view, the complainant complains that the lower court would, in some cases, wrongly assume that the costs of determining the after-tax claim were not commercially justified. Contrary to the complainant's opinion, the set-off of expenses not justified on commercial grounds confirmed by the lower court is therefore not objectionable under federal law. The appeal is therefore also unfounded in substantive terms and must be dismissed.
  • Judgment of 3 October 2019 (2C_683/2018): Direct federal tax and state and municipal taxes 2005-2007 (Berne); tax fines; the subject-matter of the dispute are the fines confirmed by the lower court for completed tax evasion; "In summary, the complaint proves to be partially justified. The contested decision must be annulled in so far as it confirms a tax fine based on the offsetting of flight costs to Canada [...]. For the recalculation of the fines for the tax year 2006, the matter must be referred back to the tax administration of the Canton of Berne." (E. 9) For the rest, the appeal is dismissed.
  • Sentence of 11. October 2019 (2C_171/2019): State and municipal taxes 2012 and 2013 (Zurich); It was questionable whether a dental practice in the form of a public limited company was to be treated transparently under tax law due to the lack of a cantonal, health-law institute licence and whether the complainants, due to their duty to cooperate under tax law, had been obliged on account of their economic affiliation to draw up a proper accounting system for independent dental work, otherwise the Zurich tax office, at its dutiful discretion, was allowed to offset the annual accounts of the public limited company and (partially) allocate the profits shown therein to income from self-employment. According to the Federal Supreme Court, the assessment of the tax relationship between the shareholder and his stock corporation must be based in practice on the principle of the freedom of the taxpayer to determine the tax situation as a result of the freedom of contract under civil law. If the limits of design freedom are exceeded, the existence of tax avoidance must be examined. A tax avoidance was denied by the federal court. Moreover, it is not the task of the tax office to implement the health regulations by way of taxation. The Federal Supreme Court comes to the conclusion that there was no limited tax liability in the Canton of Zurich for lack of self-employment to the extent of dental work. Approval of the taxpayers' complaint.

Non-occurrence decisions / inadmissible complaints:

Decisions are listed chronologically by publication date.

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