Decisions of the Swiss Federal Supreme Court (CW 34 - 2021)

Overview of the tax law decisions of the Swiss Federal Supreme Court published in the week of 23 - 29 August 2021.

Judgment of 5 August 2021 (2C_390/2020): State and municipal taxes as well as direct federal tax 2010 (Thurgau); privileged liquidation taxation in the event of cessation of self-employment; private withdrawal; in the present case, it was disputed whether the couple completed the liquidation of the agricultural business in 2011 with the private withdrawal of three properties or in 2012 with the sale of these three properties. Contrary to the lower court, the Federal Supreme Court states that there is deliberately no minimum holding period for business assets or private assets; and also that a "minor self-employed activity" does not stand in the way of privileged liquidation taxation. However, the taxpayers only comment on the objective expression of will; they cannot prove the subjective element of the formation of will, which means that no private withdrawal took place. Consequently, only the profits from 2011 and 2012 are subject to privileged liquidation taxation; the capital gains from 2010 are subject to ordinary income taxation. Dismissal of the taxpayers' appeal.
Judgment of 28 July 2021 (2C_23/2020; 2C_101/2020): Direct federal tax and state and municipal taxes 2010 (Solothurn); after-tax proceedings; transfer of patents; in dispute is whether the lower instance was right to set aside the after-tax rulings. It is to be assumed that the patents in question were transferred from C. GmbH to the taxpayer in April 2009. It is also undisputed that the taxpayer resold the patents to B. AG on 30 June 2010. The first realisation event is therefore the transfer of the patents in April 2009 from C. GmbH to the taxpayer at a lower price. The tax office assumed a second realisation event in 2010, namely a hidden capital contribution to B. AG. Of decisive importance in this case is whether the taxpayer transferred the patents to the business assets in 2009, which presupposes an independent gainful activity. The question of whether a taxable private withdrawal had taken place with the transfer of the patents from the taxpayer to B. AG in June 2010 was only dealt with summarily by the lower court. Insofar as the lower court had dealt at all with the question of the existence of self-employment, it could not be followed. It is not comprehensible to what extent it could be concluded from the taxpayer's lack of self-employment prior to the establishment of C. Ltd. that the taxpayer did not engage in self-employment later on either. The taxpayer has only insufficiently distinguished between the two spheres of assets. However, great weight must be attached to the fact that the patents in dispute belonged to the taxpayer personally between April 2009 and June 2010. The lower court's assumption that no subsequent taxes could be levied for the 2010 tax year because there was no income from self-employment proves to be incomplete in any case on the basis of the current state of the file and therefore contrary to federal law. The appeal of the cantonal tax office is upheld and the matter is referred back to the lower court for supplementation.
Judgement of 5 August 2021 (2C_514/2021; 2C_516/2021): Direct federal tax and state and communal taxes 2016 and 2017 (Appenzell Ausserrhoden); The taxpayer A. AG is of the opinion that the assessment rulings based on dutiful discretion are null and void. It objected to the fact that the canton of SG, as the canton of real estate, had not allocated any profit in favour of the canton of AR. In the case of direct federal tax, the question of intercantonal tax segregation does not arise at all, since according to Art. 105 para. 3 DBG, the cantonal authorities assess the direct federal taxes of legal entities that have their registered office or place of effective management in the canton at the end of the tax period or tax liability. The situation is different for state and municipal taxes. Here, the canton of SG is authorised to levy the proportional taxes on profits and capital. Only because the canton of SG assumes a lower total profit and total capital than the canton of AR cannot be concluded that the tax is null and void. The taxpayer could have raised an objection, but it did not do so. Instead, it decided to submit a revision request to the Canton AR. The alleged double taxation is therefore the result of procedural omissions on the part of the taxpayer. Dismissal of the taxpayer's appeal.

Addendum of a decision from the previous week (link accessible again):

Judgment of 28 July 2021 (2C_401/2020): State and municipal taxes 2015, double taxation (St. Gallen) The complaining taxpayer association has capital and business properties in various cantons. The capital segregation (with a focus on investment properties) was in dispute. In the case of an appeal for violation of the prohibition of double taxation, it is not necessary for the taxpayer to file an appeal in a canton whose capital segregation method he considers to be incorrect. Rather, it is sufficient for the taxpayer to defend himself only against the last assessment, which makes the double taxation actual, even if the taxpayer would agree with the method of the last assessing canton per se. The capital taxation of an association is governed by the principles on wealth taxation. For the proportional debt transfer, the relevant assets - in particular the real estate - must be valued by the participating cantons according to uniform rules (by means of a repartition factor). On the other hand, it is fundamentally inadmissible to transfer not only the debts but also the gross assets unseen according to repartition quotas, since otherwise cantons with (too) low official market values would participate to an unjustified extent in the taxation of more realistically valued properties in other cantons. With regard to the canton BL, it is then pointed out that it is doubtful whether the market valuation practice there is still within the scope of the cantonal discretion. If a debt surplus arises in BL due to the low valuation after the debt transfer in accordance with repartition values, the other cantons cannot be required to take it over. The taxpayer's appeal is upheld insofar as all cantons must reassess. Note: The ruling contains further explanations and obiter dicta on intercantonal tax apportionment and possible future changes in case law that are worth reading.

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