Overview of the tax law decisions of the Swiss Federal Supreme Court published in the week of 16 - 22 August 2021.

  • Judgment of 29 July 2021 (2C_80/2021), intended for publication: Withholding tax, refund claim, tax avoidance; The respondent (domestic limited company) had acquired D. SA in 2005 from a seller domiciled in Paraguay (for the background, see our detailed article on the decision of the lower court). In dispute was the entitlement of the respondent to restitution with respect to the pre-existing (old) reserves. First of all, the Federal Supreme Court commented as follows on the practice on old reserves / practice on the purchase of a full wallet published by the FTA (Federal Tax Practice, Ex. 18 on Art. 21 para. 2 VStG), according to which in the case of an acquisition of all shares in a joint-stock company by a Swiss holding company from a foreigner at a price higher than the nominal value, in the presence of relevant reserves / funds not required for business purposes, tax avoidance was assumed: The practice must be understood to the effect that such a circumstance represents a weighty indication of the existence of possible tax avoidance, but that this in no case replaces the in-depth individual case examination on the basis of the tax avoidance criteria anchored in the case law. This is therefore (contrary to the lower court) not an objectification of the conditions of tax avoidance. The indications described above were also present here. In addition, the fact that D. SA had already been de facto liquidated in 2008 was of secondary importance, since it could not be said that the liquidation proceeds had been structured to avoid withholding tax. The seller had then been domiciled in a non-DTA state and nothing had prevented the respondent from demanding a prior distribution or a purchase price reduction from the seller with regard to the possible tax burden. The FTA had succeeded in providing sufficient evidence of the indicia of tax avoidance, which is why it would have been up to the respondent to prove economic motives for the chosen course of action. It had not succeeded in doing so in the present case. In particular, the argument that the respondent had intended to use the cash of D. SA for further acquisitions was unsuccessful: On the one hand, it had taken on debt in excess of the old reserves in the year of acquisition, but had made further acquisitions in the following years without using the cash of D. SA. Furthermore, the de facto liquidation of D. SA showed that it had not been of economic interest to the respondent from the beginning. Accordingly, the chosen procedure could only be explained by the intention of saving tax. Finally, the Federal Supreme Court pointed out that - contrary to what was implied by the lower court - the period between the acquisition of the shares and the dividend distribution was irrelevant. Appeal of the FTA upheld.
  • Judgment of 28 July 2021 (2C_1021/2020): Value added tax, tax periods 2009-2013; The interpretation of Art. 112 para. 1 sentence 1 VAT Act results in an unequal treatment of old and new law tax claims and leads in the present case to the fact that the disputed tax claim from 2009 - unlike that from 2010 - is not time-barred. Furthermore, the amount of the remuneration received for servicing services rendered was disputed, whereby the lower court's finding that the entire retention amounting to the difference between the customer interest payments and the transfer price was intended to compensate for the servicing services is not obviously incorrect. Partial approval of the taxpayer's appeal due to the statute of limitations (2010 tax period). With respect to the tax periods 2009, 2011, 2012 and 2013, the taxpayer's appeal is dismissed.
  • Judgement of 5 August 2021 (2C_971/2020): Gift tax 2006 (Vaud); The deceased husband of the complainant received undeclared gifts from his mother in 2006. It is disputed whether the donor's residence in 2006 was in Vaud or in Germany and whether there is therefore any legal basis at all for the Vaud gift tax. The fact that the German tax authorities issue a tax assessment for a person liable to tax in Switzerland does not in itself call into question a tax domicile in Switzerland. Moreover, the donor did not challenge her tax domicile in Switzerland for 2006 on the basis of her German tax assessments for 2005 and 2006. The finding that the donor was domiciled in the canton of Vaud in 2006 is therefore not arbitrary. Dismissal of the taxpayer's appeal.
  • Judgement of 5 August 2021 (2C_41/2021): State and communal taxes 2015 (Aargau); the complainant couple owns a property in the canton of AG, where they resided together with their daughters for several years and were subject to unlimited tax liability. At the end of 2015, the couple deregistered in the canton of AG and moved their residence to the canton of SZ, where they rented a one-room flat. The spouses remained subject to unlimited tax liability in the canton of AG, against which they took legal action. Before the Federal Supreme Court, they complained, among other things, of a violation of the freedom of establishment. In the opinion of the Federal Supreme Court, the freedom of establishment in the present case is of no independent significance apart from a possible violation of harmonised cantonal tax law (StHG 3 I and II as well as 4b). In addition to general remarks on the distribution of the burden of proof in tax law (in particular the norm theory), the Federal Supreme Court deals in detail with tax residence in the present decision and, like the lower court, comes to the conclusion that the taxpayers were subject to unlimited tax liability in the canton of AG in the tax period in question. Dismissal of the taxpayers' appeal.
  • Judgment of 5 August 2021 (2F_7/2021): Appeal against the Federal Supreme Court judgment 2F_17/2020 of 29 October 2020 (see our article of 20 December 2020); dismissal of the taxpayer's application insofar as it is to be admitted.
  • Ruling of 29 July 2021 (2C_758/2020): State and municipal taxes and direct federal tax 2015 (Schwyz); commercial securities trading; In the present case, a bank employee traded privately in securities (or in particular in derivatives with a strong leverage effect) with the following results: +7k (2012), -3k (2013), +15k (2014), -2.3 million (2015), +11k (2016), -17k (2017). For 2014, the taxpayer had declared income from self-employment for the first time, which was not taken into account by the tax authorities (hobby). The loss offset in the 2015 tax period, in which the taxpayer no longer carried out any transactions after the abolition of the minimum euro exchange rate, was now in dispute. Contrary to the lower court, the Federal Supreme Court qualified various indications differently, namely: The reduction in the frequency and volume of transactions can no longer be weighted equally in view of the abolition of the minimum euro exchange rate in the year in question; rather, the corresponding circumstances and developments in the preceding and, if applicable, subsequent periods must also be taken into account here, which, however, is not apparent from the files. The lower court correctly recognised that with regard to the capital turnover intensity (transaction volume) of leveraged products, the value of the underlying assets is not suitable as a yardstick; however, the lower court does not explain in a comprehensible manner which size it uses instead. This must therefore also be clarified further, whereby the "size" of the leverage used is likely to be particularly relevant. Finally, the Federal Supreme Court contradicts the lower court, in particular by confirming the use of borrowed funds from 2014 and the intention to make a profit. The taxpayer's appeal is upheld to the extent that the assessment is annulled and sent back to the tax authority for reassessment.

Decisions in the area of administrative assistance / non-admission:

Decisions are listed chronologically by publication date.

Tax topics covered in this post:
Income Tax
Withholding Tax
Value Added Tax (VAT)
Gift Tax
Treaties