Overview of the tax law decisions of the Swiss Federal Supreme Court published in the week from 31 July - 6 August 2017.

  • Judgment of 11 July 2017 (2C_443/2016, 2C_444/2016): Cantonal Income and Wealth Tax and Direct Federal Tax 2009 (Schwyz); no arbitrary determination of facts by the lower court regarding the cluster risk of a loan between sister companies; no violation of the right to be heard if all objections raised are not dealt with in detail; existence of a subsequently simulated loan and a payment in kind to the shareholder, since an uninvolved third party would not have been prepared to increase the loan to the sister company and, due to the external circumstances, it may be concluded that there is no willingness to repay the loan; dismissal of the appeal.
  • Judgment of 11 July 2017 (2C_679/2016, 2C_680/2016): State and direct federal tax 2004-2012 (Zurich); audit; deadline recovery; nullity. The tax authorities are (at least in cantons where the employer is not obliged to submit a salary statement to the tax authorities) entitled but not obliged to obtain a salary statement directly from the employer in the event of a breach of the taxpayer's duty to cooperate. In such a constellation, it may in principle proceed without further ado to a discretionary assessment. The tax authority must satisfy itself in particular about the durability or plausibility of the assumptions and presumptions it has made in the prudent estimate to be made. However, the Authority cannot be required to carry out excessively detailed investigations. Although the violation of procedural obligations may not be worthwhile, this does not mean that the assessment may deliberately deviate from reality to the detriment of the taxpayer for fiscal or penal motives. In the present case, the tax authorities systematically increased the estimated income year after year in an increasingly massive manner, without taking any measure to check the plausibility of these increases. The assessments thus appear to be exclusively penal or fiscally justified. However, this alone did not lead to the annulment of the contested assessments. In the present case, there was another essential element which caused the invalidity of a large part of the contested assessments: For the tax claims assessed, debt collection proceedings were initiated in the majority of cases and, among other things, wage garnishments were carried out. As soon as the assessment authority had received the copy of the attachment documents sent to it as a creditor, it had to be established beyond doubt that the taxpayer did not (no longer) have attachable assets at that time. It was also clear that their income was massively below the amounts invested in the discretionary assessments. Against this background, the Federal Supreme Court summarized that the "approach of the tax office [...] ran so blatantly contrary to the knowledge available to it at the latest after the first wage garnishment that it can be described as an expression of arbitrariness that cannot be justified by anything. In so doing, the Office acted in a repulsive, even intolerable, manner contrary to its duty of investigation and its obligation, laid down by the legislator, to carry out the assessment in accordance with its dutiful discretion. This is a conspicuous defect of exceptional seriousness in terms of both substance and procedure, the sanctioning of which does not jeopardise legal certainty [...]" (E. 5.3.3.). For background information see also the article in the NZZ Online of August 3, 2017 with reference to the article in the Beobachter of August 2, 2017.
  • Judgment of 17 July 2017 (2C_655/2016): State and municipal taxes for the tax period from 1 July 2009 - 30 June 2010 (Zug and Lucerne); prohibition of intercantonal double taxation; current double taxation; questionable was the forfeiture of the right of appeal in that the complainant (jur. person) has submitted the Zug tax return without reservation and has not made any tax assessment or otherwise expressed that due to the transfer of the registered office from Lucerne to Zug a limited tax liability remains in the Canton of Lucerne due to a permanent establishment; according to the previous Federal Supreme Court case law, a taxpayer forfeits the right to contest the assessment of a canton if he unconditionally acknowledges his tax liability there in the 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 further legal remedies and paying the assessed tax amount; on the other hand, part of the doctrine is of the opinion that under the Federal Supreme Court Act (FSCA) there is no longer any need for a reason for forfeiture by affected persons, while in the literature, however, the view is also expressed that the present constellation is a special feature of intercantonal double taxation law, which continues to apply under the FSCA; the Federal Supreme Court leaves this as yet unresolved question open in the present decision, since the action of the appellant (failure to declare the Lucerne permanent establishment in the Canton of Zug despite the fact that it has a qualified representative under tax law and a chairman who is well versed in tax law) proves to be contrary to good faith and the appellant's conduct therefore does not deserve legal protection; the appellant must accept the consequences of double taxation; the appeal proves to be unfounded and is dismissed to the extent that it is upheld.
  • Judgment of 17 July 2017 (2C_727/2016): Appeal authority of the City of Geneva in VAT proceedings concerning industrial companies in the Canton of Geneva (Services Industriels de Genève; SIG); no incomplete or incorrect presentation of the facts by the lower instance concerning the establishment and affiliation of industrial companies in the Canton of Geneva, to the extent that these are relevant to the decision at all; no appeal authority of the City of Geneva as co-owner of the industrial companies in the Canton of Geneva, which was the sole addressee of the FTA's decision concerning services exempted from tax; dismissal of the appeal.

Decisions are listed chronologically by publication date.

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