Decisions of the Swiss Federal Supreme CourtCW 16 - 2025)

Overview of the tax rulings of the Swiss Federal Supreme Court published between April 14 - 20, 2025:

Judgment of March 21, 2025 (9C_690/2023) - for publication: Withholding tax 2016 - 2018: In 2012, A AG (taxpayer) received real estate as an inheritance from the estate of its deceased shareholder, which it recognized as extraordinary income and subsequently reported in the general reserves or statutory retained earnings for several years. In its ruling of November 30, 2017(2C_1135, 2C_1136/2016; see our article of January 7, 2018), the Federal Supreme Court qualified the inheritance net of inheritance tax (around CHF 50 million less around CHF 18 million = around CHF 32 million) as a capital contribution pursuant to Art. 60 lit. c DBG. Around CHF 50 million was reported as a "reserve from capital contributions" for the first time in the 2016 annual financial statements. In April 2017, the AGM of the taxpayers resolved a distribution from capital contribution reserves in the amount of CHF 1.08 million. In May 2017, form 103 was submitted and the withholding tax of CHF 378k was paid with reservation; the KER had not yet been reported and approved. In the 2017 annual financial statements, the "statutory capital reserves" were reduced to the net capital increase less distributions made. In February 2018, the capital contribution from 2012 (around CHF 32 million) and the repayment in 2017 (CHF 1.08 million) were reported on form 170. In this case (after the correction made again in 2017), this was a transfer from a capital contribution of the direct shareholder to the separate KER account, which was always openly reported and fully traceable under commercial law. Contrary to the view of the FTA and the lower court (see our article of October 29, 2023 on judgment A-3032/2021), there is no apparent tax law reason why open capital contributions that are not initially reported separately should not be eligible for the exception under Art. 5 para. 1bis VStG after a transfer to a separate account in the commercial balance sheet in accordance with commercial law. Furthermore, it is not clear to the Federal Supreme Court to what extent the FTA must check compliance with the requirements promptly after the contribution or a notification must be made within 30 days; the distributing company bears the evidentiary risk that this can no longer be determined due to the passage of time. In this respect, it is sufficient if the requirements of Art. 5 para. 1bis VSTG (separate disclosure and notification of changes) are met at the time of the distributions. At the time of the distribution in 2017, the notification regarding deposited KER was not yet fulfilled. The withholding tax of CHF 378k was therefore due and will not be waived retroactively after notification. Partial approval (KER = around CHF 31m) of the taxpayer's appeal.
Judgment of March 26, 2025 (9C_41/2024) - intended for publication: Turnover tax 2011-2016; The dispute is whether the foundations are to be qualified as securities dealers pursuant to Art. 13 para. 3 StG, in particular as traders or intermediaries, due to their activities (purchases and sales of shares in B-Holding) in connection with two employee participation plans. For dealers and intermediaries, the wording states that this activity must make up exclusively or at least a significant part of a person's overall activity for them to become a securities dealer based on Art. 13 para. 3 lit. b StG. Taking into account the legislative history, the Federal Supreme Court has recognized that the activity of an intermediary under Art. 13 para. 1 StG must be defined on the basis of the concept of brokerage as it prevails in brokerage contract law(judgment of 25 February 2021 2C_638/2020 E. 3.3. and 3.4; see also our article of March 21, 2021). Consequently, only those who, as investment advisors or asset managers, causally influence the purchase or sale of taxable documents without themselves being a party to the taxable transaction can be considered intermediaries under Art. 13 para. 3 lit. b no. 2 StG. The foundations were involved in the disputed transactions as contracting parties and not merely as intermediaries. The foundations can also not be characterized as professional traders because they bought and sold the taxable deeds for their own account and did not carry out this activity on a professional basis (profit-seeking, economically independent and continuous). They also do not qualify as other securities dealers pursuant to Art. 13 para. 3 lit. d StG, as the legislator has restricted the group of other securities dealers to certain legal forms. The conditions for tax avoidance are also not met. Appeal of the A.‍ Foundation upheld
Judgment of March 27, 2025 (9C_181/2024): Cantonal tax 2010-2019 (Fribourg); supplementary tax and criminal tax proceedings; In the context of the automatic exchange of information, the cantonal tax administration became aware that the taxable couple had movable assets (bank deposits and life insurance) which they had not declared in the relevant tax periods. The cantonal tax administration subsequently levied corresponding additional taxes and imposed a fine on the liable parties for completed tax evasion. Before the Federal Supreme Court, the taxpayers objected in particular to taxation contrary to the agreement, as the assets held in Portugal should not be taxed in Switzerland. The Federal Supreme Court dismissed this objection and other formal complaints as unfounded. Dismissal of the taxpayers' appeal.
Judgment of March 28, 2025 (9C_445/2024, 9C_454/2024): Staats- und Gemeindesteuern 2013 (Aargau); In the second instance (see our contributions of March 26, 2023 on the first instance to the judgments 9C_621/2022 and 9C_623/2022 of February 27, 2023) it was again disputed whether A. AG has provided a pecuniary benefit to a related party. A. AG sold a property for CHF 2.7 million to K. AG in August 2013, which sold the property to L. AG for CHF 4.3 million. At the time of the meeting of the Board of Directors at which this transaction was discussed and decided, H was the holder of a claim against K. AG. In the first instance, the lower court took the view that the underpriced sale to K. AG had led to H's claim regaining its value. As the Federal Supreme Court recognized at the time, the lower court found that the transfer of the property from A. AG to K. AG fulfilled at least most of the requirements of a hidden profit distribution. However, the administrative court had wrongly failed to determine whether H, as the recipient of the non-cash benefit, was related to a shareholder and to what extent he or another related party benefited from the underpriced sale. In the second instance, the lower court only had to clarify whether H, as the recipient of the pecuniary benefit (value of the loan), was related to a shareholder of A. AG (first question) and whether the remaining difference between the purchase price received by A. AG received and the market value of the property also benefited a shareholder or a related party (second question). With regard to the first question, the Administrative Court came to the conclusion that H was close to a shareholder, namely his wife C. Although the spouses had lived separately since 2008, they had not divorced. In addition, C was financially dependent on H, as he had made substantial maintenance payments to her in at least 2011 and 2012. In addition, it had at least tolerated H using the taxpayer in his role as director as if it were his own company. With regard to the second question, the lower court held that K. AG could be restructured due to the real estate business. However, K. AG itself was not related to any shareholder of the taxpayer. H and G (Board of Directors of A. AG) did have a private interest in the survival of K. AG due to their racing activities at K. AG during the relevant period and the friendly relationship between G and the owner of K. AG. However, there were no sufficient indications that their wives, as shareholders of the taxpayer, also shared this interest to a sufficiently strong extent to assume a close relationship with K. AG based on this and quasi via their husbands, so that no benefit to a related party could be assumed here. Neither the cantonal tax office nor A. AG were able to raise valid objections to this assessment in their complaints. Dismissal of the appeal by the tax administration and the taxpayer.‍
Judgment of March 28, 2025 (9C_455/2024): Staats- und Gemeindesteuern 2012 (Aargau); It is disputed whether the write-off on a loan should have already been made in the 2011 tax period (and not only at the time of the sale of the receivable in the 2012 tax period). Contrary to the opinion of the lower court, the taxpayer still acted within the scope of its discretionary powers in this case and it was justifiable for it to still assume that the receivable was recoverable at the end of the 2011 financial year despite certain doubts and therefore not yet write it off. There is no reason to assume that the taxpayer could have delayed the write-down to the 2012 financial year for tax reasons. Approval of the taxpayer's appeal.‍
Judgment of April 2, 2025 (9C_374/2024): Cantonal and municipal taxes 2016 (Geneva). It is disputed which canton may tax the income from the reversal of the replacement provision. In the absence of an actual replacement purchase, the present constellation is similar to that in which the profit from the accounting revaluation of a property located in the canton of St. Gallen, which belonged to a company without a permanent establishment in this canton, should be subject to taxation in full in the canton of location and not in the canton of domicile (BGE 111 Ia 120 E. 2-4). The lower court assigned the right to tax the income to the canton of domicile, Geneva, instead of the canton of domicile, Valais, which is incorrect. Approval of the taxable company's appeal insofar as it is directed against the Canton of Geneva and dismissal insofar as it is directed in the alternative against the Canton of Valais.‍‍‍
Judgment of April 4, 2025 (9C_97/2025): Direct federal taxes and cantonal and municipal taxes 2022 (Zug); Art. 133 and 140 DBG regulate the deadline for direct federal taxes conclusively and do not provide for a standstill of deadlines over Christmas and New Year. The canton of Zug has also not made any further provisions regarding a standstill of deadlines over Christmas and New Year in relation to tax procedures. In view of the delivery of the objection decision on December 7, 2024 via P.O. Box (A Mail Plus), the appeal filed on January 8, 2025 was filed too late and the lower court rightly did not consider it. Dismissal of the taxpayer's appeal.‍
Judgment of March 18, 2025 (9C_326/2024): Municipal tax to finance the communal facilities of the municipality (Mont-sur-Lausanne/VD); dismissal of the appeal of the taxpayer.‍
Judgment of March 18, 2025 (9C_327/2024): Municipal tax to finance the communal facilities of the municipality (Mont-sur-Lausanne/VD); dismissal of the appeal of the taxpayer.‍
Judgment of March 21, 2025 (9C_22/2024) - scheduled for publication: Real estate gains tax 2019 (Neuchâtel); The dispute is whether the cantonal court was right to decide that the transfer of the condominium unit by A. to his children is a gift and consequently the real estate gains tax is deferred. In the deed of gift, he reserved a usufruct and in return assumed the children's mortgage debt. With regard to the consideration, the Federal Supreme Court recently stated again that the term "proceeds of sale" is not defined in the law and that the StHG therefore leaves the cantons a certain amount of leeway to define it(judgment of 26 October 2023 9C_335/2023; see also our article of 26 November 2023). With regard to the reservation of usufruct in particular, the Federal Supreme Court ruled that the StHG does not restrict the cantons' room for maneuver to such an extent that they may not consider usufruct as a consideration. Art. 58 para. 3 and 4 LCdir contains a provision that generally grants a tax deferral if the transfer is subject to a usufruct or the assumption of a mortgage debt. This provision is therefore based exclusively on the form of the consideration and does not take into account the relationship between performance and consideration. It therefore completely disregards the requirement of a disproportion between the benefits, which is, however, necessary for the granting of a tax deferral as a mixed gift. Art. 58 para. 3 and 4 LCdir therefore violates Art. 12 para. 3 lit. a StHG. Appeal by the Neuchâtel tax office upheld and referred back to the cantonal court for reconsideration and decision.