Overview of the tax law decisions of the Swiss Federal Supreme Court published in the weeks from 2 - 22 July 2018.

  • Judgment of 15 June 2018 (2C_760/2017): Direct federal tax and cantonal and municipal taxes 2003 - 2009; after-tax and penalty tax ruling; the opening of after-tax and penalty tax proceedings was legal; with regard to the penalty tax ruling for the 2003 tax period, the limitation period applicable as lex mitior in accordance with Art. 184 para. 1 lit. b no. 1 in conjunction with Art. 184 para. 1 lit. b no. 1 is para. 2 DBG and the analogous StHG provision has, however, already expired, as the tax administration did not issue a ruling until mid-2014; the taxpayer's complaint is partially upheld.
  • Judgment of 15 June 2018 (2C_203/2018): Direct Federal Tax and State and Municipal Taxes 2014 (Lucerne); in August 2015, the over-indebted complainants sold all shares in the joint stock company, which was also over-indebted without the loan and which was declared bankrupt only a few months later, for a symbolic franc to a penniless buyer who took over all rights and obligations from the spouses; on the basis of the content of the agreement, the personal financial situation of the two contracting parties and the circumstances of the transaction, the lower court held that the purpose and effect of the agreement was to relieve the complainants from having to repay the loan or to be held accountable for it in any way; moreover, the lack of ability and willingness to repay did not only exist at the time of the agreement with the impecunious buyer, but already in the tax period 2014; a lender unconnected with the complainants would never have concluded or maintained a loan without requiring from them, in particular, substantial securities; thus, at the latest in 2014, the loan and the payment in kind were simulated; the complainants' complaint is rejected
  • Judgment of 15 June 2018 (2C_276/2018): Direct federal tax and state and municipal taxes 2009 - 2011 (Appenzell Ausserrhoden); controversial were the offsets "motor sport activities", "fines" and "material purchases 2011" at the level of the complainants (spouses). The lower court considered that the husband had received payments in kind from the GmbH in which he held a majority interest. The operative activity of the GmbH is mainly aimed at the assembly and repair of windows. The husband pursued motor sports activities in his spare time, with the expenses being borne by the GmbH in each case. The complainants have not been able to show that the sporting activities were used for customer care and that they led to new orders. The Federal Supreme Court therefore concluded that the costs served to cover the shareholder's own interests and thus the private expenditure of his life. The Federal Supreme Court also considered the set-off regarding "fines" to be justified, on the grounds that there is no criminal liability of the employer in the event of a violation of road traffic regulations during a professional journey. If the employer pays the fine, it provides the employee with a taxable payment in kind. The "Material purchase 2011" involved payments to two payees located abroad. The Federal Supreme Court has imposed increased requirements on the proof of payment for payments abroad. Since the complainants were unable to provide any further information about the recipients of the payments, the Federal Supreme Court assumed, following the lower court, that the payments had been made to the taxpayer. Rejection of the taxpayers' complaint.
  • Judgment of 26 June 2018 (2C_450/2017), official publication planned: Withholding tax 2014 (Vaud); the complainant taxpayer lived with his wife and three children in France, but was subject to withholding tax in Switzerland due to dependent gainful employment. The tax authority had set the withholding tax rate C0 (two-earner couples without children). In the tariff, a certain income of the other spouse is assumed as a lump sum, which, however, was much higher than the actual income of the spouse. The taxpayer therefore requested that the lower income of the spouse be taken into account in the tariff as well as the classification C3 (child deductions), the latter among other things because the taxpayer did not receive any child allowances in Switzerland and the child deductions could be taken into account in France. In the present case, only 80% of the income of the couple resident in FR originated from Switzerland; the Schumacker ruling was therefore not applicable and a tariff correction in this sense was not possible. However, the flat-rate calculation of the spouse's income in the present case violated the ability-to-pay principle. In addition, the taxpayer fulfilled the requirements pursuant to Art. 35 para. 1 lit. a, 86 and 91 DBG, which is why the (half) child deductions had to be granted. The taxpayer's appeal was upheld.
  • Ruling of 25 June 2018 (2C_290/2018): Direct federal tax and state and municipal taxes 2012 (Thurgau); the tax office arrived at an unexplained increase in assets by a total of CHF 710,643 in its statement of assets and liabilities; after the taxpayers had submitted the account statements for the agricultural account but not the detailed statements for the transactions of interest and, moreover, had not provided any further explanations regarding the account balance and amortisation, the tax office proceeded to a discretionary assessment; with their highly selective cooperation, the complainants, on the one hand, created the conditions for a discretionary assessment and, on the other hand, were not able to successfully contest the proof of incorrectness in the context of their objection; the complainants' appeal is dismissed.
  • Judgment of 28 June 2018 (2C_986/2017), official publication scheduled: Direct federal tax and cantonal and municipal taxes 2010 and 2011; inheritance of losses carried forward in the case of self-employment of the testator. The losses carried forward by a self-employed person are attributable to the taxpayer himself and not to the company. The only exception to this link to the person of the entrepreneur is the transfer of previous year's losses on the conversion of a partnership into a corporation, as provided for in STS No. 5 of the FTA on restructuring (Chapter 3.2.3.3, page 24). Art. 12 DBG does not include the inheritance of losses incurred by the testator to his heirs, therefore the testator's losses carried forward cannot be claimed in the tax return of the descendant who continues the activity (E. 5.2). The taxpayers' complaint is dismissed.
  • Judgment of 3 July 2018 (2C_322/2017): Direct Federal Tax and State and Municipal Taxes 2012 (Zug); it was disputed whether the lower court was right to classify a claim of the appellant against the shareholder and chairman of the board of directors as a simulated loan or the granting of the same was classified as a hidden profit distribution; the unusual nature of the granting of the loan was easily affirmed, as the claim represented more than 82% of the company's assets; moreover, at the time the loan was granted, the creditworthiness of the shareholder and Chairman of the Board of Directors had already been seriously questioned, as just under two years previously he had been ordered in the first instance to pay more than CHF 38.8 million; moreover, the complainant had at no time submitted written agreements (loan agreement, information on securities provided, repayment obligations or intentions or interest on the loan) despite requests to do so; the complainant's complaint was rejected.

Non-occurrence decisions / inadmissible complaints:

  • Judgment of 18 June 2018 (2C_519/2018): Electricity purchase; the appeal against the contested interim decision concerning the extension of the time-limit is manifestly inadmissible and also manifestly not sufficiently reasoned; the appeal is not upheld
  • Judgment of 18 June 2018 (2C_517/2018): Direct Federal Tax, State and Municipal Taxes 2007 and 2008 (Lucerne); the appeal against the contested interim decision concerning the complainants' request for a stay of proceedings is manifestly not sufficiently well-founded; to the extent that the statements refer to the ordered subsequent and penalty taxes, these are not to be dealt with due to the lack of reference to the subject matter of the dispute; the complainants' appeal will not be upheld.

Decisions are listed chronologically by publication date.

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