Decisions of the Swiss Federal Court (CW 14 - 2019 )

Overview of the tax law decisions of the Swiss Federal Supreme Court published in the week 1 - 7 April 2019.

Judgment of 11 March 2019 (2C_71/2018): New casino regulations; application for examination and determination as an appropriate minimum standard; in its submission of 17 July 2015 and 30 September 2015, the SRO A., which is an association within the meaning of Art. 60 ff. ZGB, the Federal Gaming Board SFGB requested the SFGB to state that its regulations of 8 July 2015 represent an appropriate minimum standard for the due diligence and other obligations of casinos under Chapter 2 of the Federal Act of 10 October 1997 on Combating Money Laundering and Terrorist Financing in the Financial Sector (MLA; SR 955.0; in the version applicable on 1 January 2016). The Federal Supreme Court considered that the judgment of the lower court was not objectionable to the extent that the lower court did not approve or recognise the appellant's regulations as a concretisation of the duties of care under money laundering law in accordance with Chapter 2 of the MLA in the sense of a false, directed or "regulated" self-regulation under money laundering law. "It is clear from the legal concept for the concretisation of the duties of due diligence under money laundering law in accordance with the second chapter of the AMLA and the monitoring of compliance with these duties by financial intermediaries that the legislator has assigned these two tasks to the financial intermediaries governed by special legislation (Art. 2 para. 2 AMLA) concerning a state authority - FINMA or the SFGB - and has reserved the right to delegate tasks to an organisation outside the administration - in this case a recognised self-regulatory organisation - for financial intermediaries within the meaning of Art. 2 para. 3 AMLA. In view of the fact that a delegation of tasks requires a legal basis in the formal sense (Art. 178 para. 3 BV; BGE 138 I 196 E. 4.4.3 p. 201), and that there is no legal basis for the casinos as financial intermediaries under special law within the meaning of Art. 2 para. 2 letter e AMLA, a delegation of the two tasks of "specifying the due diligence obligations under money laundering law pursuant to Art. 2 AMLA and monitoring compliance with them by the SFGB to the complainant" is excluded (E. 3.1). The taxpayers' complaint is dismissed.

Judgment of 12 March 2019 (2C_157/2019): Rejection petition against the Vice-President of the Tax Appeal Commission of the Canton of Berne; the complainant claims before the Federal Supreme Court that, as a result of the action of the Berne Administrative Court, his supervisory complaint also qualifies as a rejection petition and should be forwarded to the President of the Tax Appeal Commission, or the subsequent rejection of the request for rejection by the Tax Appeal Commission, directly and with costs, his rights to a fair hearing (Article 29(1) BV) and to a fair hearing (Article 29(2) BV) had been infringed; in the letter described as a supervisory notification, the complainant demanded, inter alia the super-provisional release of the Vice-President on the grounds that it is obvious that the Vice-President is unlikely to be able to guarantee a fair trial; the Federal Supreme Court considers that party requests and applications must be interpreted in good faith, in particular in the light of the reasons given for them, and that it is sufficient if what is requested can be deduced in its entirety from the submission of the person entitled; consequently, the assessment of the complainant's application at first instance as a request for rejection by analogy does not violate federal law The forwarding of the request to the President of the Tax Appeals Commission and the dismissal of the decision of the Tax Appeals Commission is also not objectionable, particularly as it did not go beyond the requests of the complainant which were interpreted in good faith; on the basis of the complainant's demonstrable knowledge of the fundamental obligation to pay the costs of the proceedings before the Tax Appeal Commission and the fact that the administrative court had been notified of the forwarding of the request for rejection, the complainant would have been in a position to withdraw his request, which is why the Federal Supreme Court considers that there has been no violation of the rights asserted; rejection of the complainant's appeal.

Judgment of 14 March 2019 (2C_238/2019): Radio and television reception fees; application for exemption from fees for private radio and television reception; the applicant does not meet the conditions due to lack of entitlement to receive supplementary services; the appeal is dismissed

Judgment of 15 March 2019 (2C_703/2017): State and municipal taxes 2012 (Aargau); State and municipal taxes 2012 (Aargau); C, sole shareholder and Chairman of the Board of Directors of D AG, whose shares were resold at the end of 2010, voluntarily granted substantial amounts of money as a "year-of-service gift" to selected employees of E AG, which was wholly controlled by D AG, in 2010, which he paid from his private assets. The complainants also received several payments totalling 32,250 Swiss francs, which they declared as gifts in their 2010 tax return. It was disputed and had to be examined whether the donations were taxable income (Art. 7 para. 1 StHG) or donations exempt from income tax (Art. 7 para. 4 lit. c StHG). It is not disputed that C did not have a legal obligation to pay the disputed grants. However, this does not yet indicate the existence of a gift, since the law expressly also refers to gifts of seniority and anniversary gifts as income from employment (Article 17 para. 1 DBG; Article 26 para. 1 StG/AG), i.e. also benefits to which there is no contractual entitlement. The seniority gift does not compensate for work performance, but for loyalty, and is therefore not a gift (E. 3.3.4). The previous instance assumes that the grants were a consideration for the good and loyal cooperation provided in the past, which is likely to have been reflected in the sales price obtained for the company (E. 3.3.5). The complainants' submissions do not make the assessment of evidence at first instance appear arbitrary. "The assumption that the beneficial owner of the company to which this value ultimately accrued wanted the former employees to participate in this value with the donation is indeed obvious. This alone is sufficient for the acceptance of a seniority gift, regardless of whether this is also associated with a motivation or even an obligation for future work" (E. 3.3.5). The taxpayers' complaint is dismissed.

Judgment of 21 March 2019 (2C_123/2018): Direct federal tax 2012; participation deduction. The A. AG was held (directly or indirectly) at 50% each by D.E. and F. According to criminal charges filed by F. in 2008 and 2009, D.E. and the managing director of A. AG, H.E., unlawfully acquired the wholly owned subsidiary B. GmbH and the sole assets of A. AG were sold to I. and at the same time a re-investment was secured. After the execution of the agreement had been temporarily prohibited by the court, D.E. and I. had circumvented this prohibition by massively increasing the share capital of the subsidiary - at nominal value, waiving the subscription right of the previous participants in favor of I. - by offsetting it against a loan granted by I., so that subsequently I. had a 98.4% share in I. and A. a 98.4% share in A. AG only held a 1.6% interest in B. GmbH. In 2012, the parties involved concluded a settlement in which, among others, the A. AG undertook to approve the capital increase and to transfer its 1.6% stake in B. GmbH to I. in return for an amount that could hardly be related only to the remaining 1.6%. It was disputed whether the participation deduction could be claimed in relation to these sales proceeds. The Federal Court concluded in E. 3.2.2. that: 'In these circumstances, it is not possible to consider the transfer of the respondent's stake in I. in isolation from the settlement agreement on which it is based and the approval of the capital increase [...]. The disputed capital increase and, above all, its approval by the respondent were part of an undoubtedly unusual, but for the purposes of Article 70(4)(b) DBG, nevertheless uniformly assessed acquisition and disposal transaction involving 100% of the share capital of [B. GmbH]. This process was completed with the execution of the Settlement Agreement and the related Assignment Agreement. It was only with the approval of the capital increase and the transfer of its (remaining) shareholding that [A. AG] irrevocably relinquished its position as the sole shareholder of [B. GmbH], thereby I. providing the unchallengeable sole entitlement to the share capital and thus uninterrupted control over the subsidiary". Accordingly, the Federal Supreme Court allowed the participation deduction.

Non-occurrence decisions / inadmissible complaints: