Decisions of the Swiss Federal Supreme Court (CW 13 - 2021 )

Overview of the tax law decisions of the Swiss Federal Supreme Court published during the week of 29 March - 4 April 2021.

Ruling of 9 March 2021 (2C_553/2019): Direct federal tax 2015; commercial real estate trading is deemed to exist if the taxpayer systematically purchases and sells real estate with the intention of making a profit. Due to the formation of a simple partnership and the external funds raised for the realisation of the project, which were substantial, it is no longer to be assumed that private property is being managed. The expertise of the co-partner is also to be credited to the complainant as they were jointly in a corporate relationship. Taking into account all the indications, it must be assumed that there is a self-employed activity, which is why the capital gains are subject to income taxation. Dismissal of the taxpayer's appeal.
Judgment of 10 March 2021 (2C_542/2018): Administrative assistance DTA (CH-IN). Here, the FTA raises two significant legal questions: (1) does the exclusion of penalties or interest from the scope of the agreement under Art. 2(3) DTA CH-India mean that criminal tax proceedings are not covered by Art. 26 DTA CH-India and (2) can administrative assistance be excluded because the tax claim is time-barred and the MoF could accordingly use the information provided exclusively in criminal tax proceedings. The lower court based its ruling essentially on the systematic context, which tends to argue that Art. 2 DTA CH-India limits the material scope of Art. 26 DTA CH-India. The Federal Supreme Court explains that this does not correspond to the purpose, since the contracting states wanted the exchange of information to be as comprehensive as possible. With regard to the second question, reference is made to a recent ruling BGer 2C_780/2018 of 01 February 2021 (see our article of 07 March 2021 ), in which the Federal Supreme Court had dealt with the question whether information is likely to be relevant if the requesting state intends to use it exclusively for tax sanctions. This was answered in the affirmative. The probable materiality was also affirmed as it was plausible that the Indian Income-Tax Act for tax penalties hinges on the same facts as the tax norms of the same Act and they are also material for tax penalties. Appeal of the FTA upheld.
Judgment of 10 March 2021 (2C_780/2020): Automatic exchange of information (MAC; MCAA; AIAG); The concept of "transmission error" in Art. 19 para. 2 AIAG does not cover misinterpretations by financial institutions and there is also no room for a teleological reduction of the provision. Consequently, in the present case, the complainant does not have to turn to the FTA, but to the bank alone, in order to obtain the correction of the allegedly incorrect data. Dismissal of the appeal.
Judgment of 10. March 2021 (2C_596/2020): State and municipal taxes 2017 (Zurich); The allocation of the taxpayer's main tax domicile was in dispute and subject to review; The taxpayer is unmarried and has been in a cohabiting relationship with his partner for some time; The cohabiting partners are each co-owners of two condominium units in the cantons of ZH and GR; Since the beginning of 2017, the taxpayer has also rented a one-room apartment (office) in the house in GR; He took early retirement on 31 May 2017 and moved to GR on 1 January 2017. He took early retirement on 31 May 2017 and moved his residence from ZH to GR on 1 June 2017. The Federal Supreme Court upheld the lower court's finding that, in view of the full-time employment of the partner and the fact that the taxpayer continued to use the apartment in ZH, there was a natural presumption that the taxpayer continued to reside in ZH for tax purposes; However, since the factual circumstances convey the picture of an increasing shift of life to GR, the foundation of this natural presumption is invalidated; dismissal of the appeal of the assessment authority.
Ruling of 16 March 2021 (2C_656/2020): Direct federal tax and cantonal and communal taxes 2016 (Vaud): The dispute in this case is whether the taxpayer may claim a support deduction in his tax return pursuant to Art. 35 para. 1 lit. b DBG or Art. 40 para. 1 StG VD. The lower court held that the taxpayer could not claim this deduction for two reasons. First, the brother had freely decided to come to Switzerland to study, so there is no objective neediness, and second, the taxpayer could not prove that he had provided his brother with financial benefits above the threshold of the support deduction. In federal court, he was also unable to prove that he provided benefits above the amount of the support deduction, so there was no need to further address the objective neediness argument. Dismissal of the taxpayer's appeal.
Judgment of 17. March 2021 (2C_77/2019): Direct federal tax and cantonal and communal taxes 2009-2015 (Ticino); freezing; the Ticino tax authority had issued a freezing order of the presumably owed back taxes / interest / fines after a criminal investigation had given indications that commissions which had been collected by companies held by the taxpayer would have been correctly attributed to him as income; the confirmation of the freezing order of the lower instance was not arbitrary; dismissal of the taxpayer's appeal.

Non-entry decisions: