Overview of the tax law decisions of the Swiss Federal Supreme Court published in the week of 11 May - 17 May 2020.

  • Judgement of 31 March 2020 (2C_578/2019): Withholding tax (monetary value benefits); the dispute was whether the interest on a partiarisches loan with a two-year notice period granted in the course of the conversion of a company to the extent that the interest rates are exceeded in accordance with the FTA Circular constitute hidden profit distributions. The Federal Supreme Court has held that in the case of a loan with a profit participation, the interest rates according to the Circular may be deviated from the interest rates set out in the Circular if necessary. However, this requires that the special circumstances that led to the conclusion of such a loan and not an ordinary loan be proven and explained. In the present case, this is only due to the participation relationship and the fact that a loan can only be terminated for a limited period of time does not justify the non-applicability of the interest rates of the Circular. Dismissal of the taxpayers' complaint; see also our contribution of 30 June 2019.
  • Judgment of 21 April 2020 (2C_135/2020): VAT (1 January 2010 to 31 December 2014); two different balance tax rates are to be applied correctly to taxable persons who sell textiles without further processing on the one hand and textiles on which embossing and screen printing work has been carried out on the other. In addition, in the case of invoices issued by the complainant for the sale of processed textiles, it is justified to apply to the whole amount the higher rate for processed textiles, since no distinction can be made between the price of the work on the one hand and that of the goods on the other. Rejection of the taxpayers' complaint.
  • Judgement of 28 April 2020 (2C_775/2019): Cantonal and municipal taxes and direct federal tax (Vaud, tax periods 2006 to 2010); if a company records payments in favour of foreign contracting parties, the tax authorities' scope for investigation is necessarily limited. This results in an increased duty of cooperation on the part of the taxpayer, who must not only state the recipient of the payment but also all the circumstances that led to the payment in question. This is in particular the case of a Swiss company that has concluded contracts with a company domiciled in the Seychelles. The tax authorities have thus rightly offset payments in kind. Rejection of the taxpayers' complaint.
  • Judgement of 28 April 2020 (2C_777/2019): Cantonal and municipal taxes and direct federal tax (Vaud, tax periods 2006 to 2010); confirmation of the case law that, in application of the triangular theory, payments in kind made by a corporation are set off as income for the shareholder if these payments are made to related parties. Rejection of the taxpayer's complaint.
  • Judgment of 7 April 2020 (2C_1057/2018): State and municipal taxes 2011 (Aargau); the dispute was whether the method used to determine the fair value of shares (similar to employee shares) for which a restriction on sale and a right of first refusal were agreed in a shareholders' agreement is in conformity with federal law. The previous instance had based its decision solely on the net asset value (without capitalised earnings value). The Federal Supreme Court held that in the present constellation there was no cause for objection if the lower instance assessed the fair value for income tax purposes differently from the rules for determining the fair value for wealth tax purposes. Dismissal of the tax authority's complaint.
  • Judgement of 7 April 2020 (2C_331/2019): Direct Federal Tax 2012 (Schwyz); The corrective measure must be interpreted rather broadly to take account of the distribution of risk between the tax authorities and taxpayers. In a case where tasks that used to be done by hand and are now done using computer programs are to be dealt with, the corrective measure is also to be applied to incorrect assessments caused by programming errors. Rejection of the taxpayers' complaint.
  • Judgement of 8 April 2020 (2C_500/2018): State and federal tax 2015 (Solothurn); taxation through own use of real estate (imputed rental value) is only waived if objective, external circumstances make its use impossible. In the case of vacancies, clear, professional sales efforts must be proven. The inflow of income is at the time of the fixed legal claim. This is also the case if a close person does not pay the rent owed. Only costs incurred as a direct result of the disability are considered disability related costs.
  • Judgement of 15 April 2020 (2C_522/2018): State and municipal taxes of the Canton of Zurich and direct federal tax, tax period 2014 (Zurich); conversion of a general partnership into a public limited company as of 30 June 2014, with retroactive tax effect as of 1 January; taxpayers were granted the so-called large pillar 3a deduction until 30 June 2014. The taxpayers were granted the so-called large pillar 3a deduction until 30 June 2014, because it had been proven that (1) the AG had not paid any AHV contributions for the employees for this period, (2) the complainants had settled with the Compensation Fund as self-employed persons for this period, and (3) the AG was only affiliated to a pension scheme within the meaning of Article 80 BVG from 1 July 2014 and no BVG contributions had been paid before this date. Approval of the taxpayer's complaint.
  • Judgement of 21 April 2020 (2C_544/2019): Cantonal and municipal taxes and direct federal tax for the years 2011 to 2013 (Geneva); if a taxpayer does not pay maintenance contributions in the form provided for in the divorce decree, but claims to have informally agreed a system of indirect payments (assumption of certain expenses relating to the children) with his former wife, he may not deduct these expenses pursuant to Art. 33 para. 1 lit. c DBG In the absence of a clear arrangement between the former spouses, the previous instance cannot be accused of having taken the view that the various payment receipts submitted by the complainant were not suitable to prove indirect payment of maintenance contributions. Dismissal of the taxpayer's complaint.
  • Judgment of 30 April 2020 (2C_1025/2019): Direct federal, cantonal and communal taxes for the 2012 tax period (Geneva); the letter from the tax administration lawfully and in good time interrupted the relative period of 5 years for the limitation of assessment; dismissal of the taxpayers' appeal.

Inadmissible appeals / decisions not to intervene:

Decisions are listed chronologically by publication date.

Tax topics covered in this post:
Income Tax
Wealth Tax
Profit Tax
Value Added Tax (VAT)
Withholding Tax
Transfer Pricing