Decisions of the Swiss Federal Supreme Court (CW 36/37 - 2023

Overview of tax law decisions of the Swiss Federal Supreme Court published between September 4 - 17, 2023:

Judgment of August 17, 2023 (9C_710/2022) intended for publication: State and Municipal Taxes (St. Gallen) and Direct Federal Tax 2018; the subject matter of the proceedings is whether the appellants A. and B. have forfeited their right to appeal. In a leading judgment from 2020(BGE 147 I 325), the Federal Supreme Court clarified that outside of the unconditional recognition of the tax claim, a forfeiture of the right to appeal can only be assumed with restraint, in accordance with the character of the prohibition of double taxation as a constitutional right, namely if the conduct of the taxpayers is downright abusive of the law or contrary to good faith. The constitutional and procedural situation has changed considerably since the original development of the forfeiture practice. Today, intercantonal double taxation affects the persons concerned more, while the cantons' need for protection has decreased. The forfeiture of the right of appeal is primarily intended to protect the canton that first imposed the tax. This interest, however, does not justify letting this canton retain taxes it has received by accepting the forfeiture of the right of appeal, which it is not entitled to levy under harmonized cantonal law. The interest of the second assessing canton, which is effectively entitled to taxation, weighs even more heavily. The forfeiture of the right of appeal no longer proves to be a proportionate measure to counteract unfaithful conduct of a taxpayer in an intercantonal relationship. Since the practice on the forfeiture of the right of appeal must be abandoned according to the above, the plea of forfeiture of the Canton of Schwyz proves to be unfounded from the outset. The elimination of a fundamentally unconstitutional intercantonal double taxation can only be refused if the conduct of a double taxed person proves to be qualifiedly abusive and the canton concerned at the same time exceptionally has a legitimate interest in withholding taxes received, although it has no tax claim under intercantonal double taxation law or even already under harmonized tax law. Such an exceptional situation clearly does not exist in the present case. By registering in the canton of SZ, the complainants have caused them to be assessed there. At that time, they also knew that the Canton SG was investigating the residence. In good faith, they should have informed the SZ assessment authority. However, this misconduct is also offset by omissions on the part of the authorities. Against this background, it is appropriate to impose 3/4 of the court costs on the complainants and 1/4 on the canton, despite the fact that the complainants were successful. Approval of the complaint of the taxpayers.
Judgment of 24 August 2023 (9C_87/2023) - intended for publication: MWST 2012-2016; Taxpayer 2, together with various other companies, belongs to the corporate and VAT group G (Taxpayer 1). After an inspection, the FTA charged the taxpayers VAT on turnover from outpatient services in the field of "Traditional Chinese Medicine" (TCM). This was justified - later also by the Federal Administrative Court - by the fact that the TCM therapists did not have a professional license within the meaning of Art. 35 para. 1 VAT Ordinance during the period in question, which is why there were no exempt services according to Art. 21 para. 2 item 3. The Federal Supreme Court protects this and specifies that the "permission" in the sense of Art. 35 para. 1 lit. b VATO must be a positive order and a mere toleration is not sufficient. It is clear from this that due to the reference to the cantonal health legislation in Art. 35 para. 1 lit. b MWSTV, a service provided by the same service provider with the same professional training and qualification - depending on the place of the service, which varies from canton to canton - is taxable or exempt from tax. Partial approval of the taxpayer's appeal regarding the statute of limitations for the tax period 2012. Dismissal of the taxpayer's appeal regarding the tax periods 2013-2016.
Judgment of August 16, 2023 (9C_663/2022, 9C_664/2022): State and municipal taxes (Basel-Landschaft) and direct federal tax 2019; The dispute revolves around the question of when - whether before or after his departure from Switzerland to the USA as of February 25, 2019 - the complainant realized the bonus forming part of his income from employment. In the assessments for the cantonal taxes as well as for the direct federal tax 2019, at this bonus less social security contributions before deduction of withholding tax was not taken into account. The assumption of the realization of income - at least if a certain income does not (merely) accrue factually (without legal grounds, e.g. due to a tortious act) without prior legal acquisition - presupposes the accrual of a fixed entitlement. The announcement of the bonus by the employer with reference to the fact that it is a "voluntary variable benefit" to which the taxpayer has "no legal or contractual claim" does not lead to a fixed claim of the complainant. Consequently, the corresponding income was not realized for tax purposes on February 12, 2019, but - especially since no further announcements were made by the employer beforehand that might have established a fixed entitlement - only with the payment on March 25, 2019. Dismissal of the taxpayer's appeals.
Judgment of 21 August 2023 (9C_342/2023): State and municipal taxes (Bern) and direct federal tax 2018; In the present case, the taxpayer did not succeed in showing how he had sufficient grounds for restoring a missed objection deadline. He also missed the deadline of 30 days after the reasons for objection ceased to exist. Dismissal of the taxpayer's appeal.
Judgment of 18 August 2023 (9C_612/622): VAT 2015-2017; The taxpayer foundation's main purpose is to support church work as well as development policy projects for disadvantaged people throughout the world. After an audit, the FTA claimed, among other things, an input tax adjustment due to non-entrepreneurial activity as well as an input tax reduction due to the receipt of subsidies and claimed the corresponding VAT amounts. In particular, it was disputed and to be examined whether the input tax corrections of the FTA supported by the lower court were lawful. The Federal Supreme Court held that a non-entrepreneurial area may only be assumed if the separation can be implemented with sufficient clarity, be it on the basis of a separate activity that is clearly recognizable to the outside or a clear purpose that differs from that of the entrepreneurial activity. In the present case, such a clear purpose, which differs from that of the entrepreneurial activity, is given in the form of the taxpayer's main activity and a separation may be made between the subordinate entrepreneurial area (web store, etc.) and the prominent non-entrepreneurial area (charitable activity). Dismissal of the taxpayer's appeal.
Judgment of 21 August 2023 (9C_675/2021; 9C_676/2021): State and municipal taxes (Solothurn) and direct federal tax 2010-2017; In dispute is whether A. GmbH may be taxed at the place of actual administration in Canton SO (and not at the statutory seat in Canton ZG). In accordance with the regulations, the Canton SO conducted and concluded a tax domicile procedure. The lower court found that the sole shareholder of A. GmbH was C. AG with its registered office in the Canton of SO. C. AG pays annual license and patent fees to A. GmbH. The economic and strategic center of the group is located in the canton of SO. A. GmbH was unable to provide any evidence to the contrary. Dismissal of the appeal of A. GmbH.

Non-occurrence: