Decisions of the Swiss Federal Supreme Court (CW 12 - 2023)

Overview of tax law decisions of the Swiss Federal Supreme Court published between March 20 - 26, 2023:

‍Judgement ofMarch 6, 2023 (9C_693/2022): Staats- und Gemeindesteuern und direkte Bundessteuer 2014 (Zurich); The lower court rightly did not consider the late appeal, since the time limit begins with the delivery or the fiction of delivery; not with the acknowledgement. Dismissal of the taxpayer's appeal insofar as it is upheld.
Judgment of February 23, 2023 (9C_677/2021) - intended for publication: Staats- und Gemeindesteuern und direkte Bundessteuer 2018 (Fribourg); In dispute is whether monument preservation work was incurred and consequently whether this is fully deductible from income. According to the BGer, it is decisive that the costs incurred were caused by renovation of the property according to the findings of the lower court and that this renovation as a whole did not serve the purpose of restoration or repair and thus not the purpose of monument preservation. The costs are therefore not deductible under the title of Art. 32 para. 3 DBG. It remains to be examined whether they are deductible under Art. 32 para. 2 DBG. The lower court excluded the deduction in a first line of reasoning because the complainants did not declare any income. In a second line of reasoning, the lower court relied on the practice of the Federal Supreme Court, according to which, in the case of an economic new building, the associated costs are not deductible for income tax purposes as a whole. According to the materials, the legislator's intention in amending Art. 32 para. 2 DBG was to push back the economic approach on which the Dumont practice had been based in favor of an objective-technical approach. An overall economic consideration of a total renovation, refurbishment or conversion project on a newly acquired property, on the basis of which the income tax cost deduction is schematically denied completely and thus also for cost components which, when considered individually, would actually be of a value-preserving nature due to their objective-technical nature, is therefore neither compatible with the wording nor with the genesis of Art. 32 para. 2 DBG. Partial approval of the taxpayer's appeal and referral back to the lower court for reassessment.
Judgment of February 20, 2023 (9C_645/2022): Direct federal tax and state and municipal taxes 2017 and 2018 (Ticino); The deductions for the use of the private vehicles of the two complainants are in dispute. The latter essentially claim that they are dependent on the private vehicle for commuting to work. This is due to (i) a high time saving (complainant I) and (ii) in order to drive the school-age children to their respective schools on the way to work (complainant II). Regarding the time savings, it was found that this was less than one hour per working day and therefore the use of public transport could be reasonably expected. The compatibility of the commute with driving the children to school (ii) is irrelevant in the present case, as these are personal/family necessities which are not relevant for tax purposes. The reference to the Equal Treatment Act was also not valid, as this does not regulate any tax issues. Also, the choice of the place of residence is free and the resulting consequences have nothing to do with equality. Dismissal of the complaint.
‍Judgement ofFebruary 22, 2023 (9C_630/2022): State and municipal taxes 2016 (Basel-Stadt); Reassessment; The taxpayer's complaints regarding violation of the right to be heard in connection with the requested inspection of files are obviously unfounded. Dismissal of the taxpayer's appeal.
Judgment of February 27, 2023 (9C_621/2022): Staats- und Gemeindesteuern 2013 (Aargau); Streitig ist, ob eine geldwerte Leistung der A.A. AG angenommen kann. Its shareholder relationships are the same as those of B.A. AG (in parallel proceedings: A.A. AG) The complainant A.A. AG (in parallel proceedings: B.A. AG) sold a property for CHF 2.5 million to M. AG in August 2013. The latter resold the property for CHF 4.3 million. At the time of the board meeting at which this transaction was discussed, G. was the holder of a claim against M. AG. According to the lower court, the sale to M. AG at a lower price resulted in G.'s claim regaining value. However, G. was not a shareholder. A set-off due to hidden profit distribution can only occur if G. is to be considered a related party. The lower court erroneously did not pursue this question because it was of the opinion that it was already sufficient for the assumption of a hidden profit distribution if the beneficiary alone was related to the company. In the parallel proceedings(9C_623/2022) concerning B.A. AG, the lower court came to the conclusion that this company had sold a loan claim against M. AG to G. for less than its value, for which reason the lower court offset the claim against B.A. AG. In doing so, the lower instance assumed that the restructuring of M. AG via the sale of the property by the complainant at below cost had been planned for a long time. As the lower court itself states, the events underlying the present and the parallel proceedings 9C_623/2022 must be considered as a whole. In such an overall view, the positions taken by the lower instance in the two proceedings cannot be reconciled. The position of the lower instance in the present proceedings, according to which the sale of the property had served precisely to restore the value of the claim purchased by G., appears more plausible than the assessment just described in the parallel proceedings concerning B.A. AG. However, the Federal Supreme Court is only certain that G., in connection with the repayment of the claim acquired by him, did not receive a pecuniary benefit twice, but at most either from the complainant or from B.A. AG. The lower court also held that other members of the board of directors must also have realized that with the transfer of the property to M. AG at a lower price, a pecuniary benefit would indirectly be paid to G.. Most of the requirements for a hidden distribution of profits are met. However, the lower court wrongly failed to determine whether G., as the recipient of the pecuniary benefit, was close to a shareholder and to what extent the sale at a lower price benefited him. Moreover, its assessment regarding the recoverability of G.'s claim against M. AG contradicts the position taken by the lower court in the parallel proceedings 9C_623/2022. Partial approval of the taxpayer's appeal and referral back to the lower court for reassessment.
Judgment of February 27, 2023 (9C_623/2022): Staats- und Gemeindesteuern 2012 (Aargau); The taxpayer company complains that the lower court established the facts of the case in various manifestly incorrect ways. In summary, it found that G. and H. (in the parallel proceedings: F.) were de facto organs of the taxpayer A.A. AG (in the parallel proceedings: B.A. AG) and that the latter had to accept the knowledge of these two persons. The taxpayer had been aware of the need to restructure M. AG. Nevertheless, it had neither written off nor adjusted the value of its claim against M. AG. Furthermore, it had waived an equivalent consideration when selling the claim. The complainant agrees that the lower court contradicts its assessment of the same facts in the parallel proceedings(9C_621/2022). There, it took the view that the sale of the property by B.A. AG had served precisely to restore the value of the claim bought up by G. The appeal was upheld. Dismissal of the taxpayer's appeal and referral back to the lower court for reassessment.
Judgment of March 1, 2023 (9C_702/2022): State and municipal taxes and direct federal tax 2017 (Solothurn); The appeal proves to be manifestly unfounded with regard to the alleged violations of various constitutional and ECHR norms. The same applies to the question of the extent to which the lower instance is said to have unlawfully applied the revision provisions and the tax auditor's grounds for recusal. Dismissal of the taxpayer's appeal.
Judgment of March 6, 2023 (9C_688/2022): Cantonal and communal taxes and direct federal tax (Geneva); recusal; the taxpayer's appeal is manifestly unfounded.
Judgment of March 7, 2023 (9C_649/2022): Real estate gains tax (Thurgau); The complainant A sold his property to C AG, which in turn resold it on the same day to D AG at a massively higher value. Since no relationship between A and C AG could be established, A was taxed for the real estate gains tax on the sales proceeds actually realized by him. After the real estate gains tax assessment had been made, the tax office determined that E GmbH, which was controlled by A, was able to acquire a property of C AG in another canton at a price below the market value. The difference to the market value corresponded approximately to the lower sales proceeds of the real estate of A, which he had sold to C AG. Thereupon, the tax office opened after-tax proceedings against A. The complainant objected to these after-tax proceedings that the resale of the real estate from C AG to D AG was known to the tax authorities and therefore did not constitute a new fact justifying after-tax proceedings. The Federal Supreme Court did not follow this argumentation, as the new fact was rather the fact that there was a counter transaction after the real estate gains tax assessment had been concluded, which economically increased the effective sales proceeds of the real estate from A to C AG. Dismissal of the appeal.