Decisions of the Swiss Federal Court (CW 40 - 2018 )

Overview of the tax law decisions of the Swiss Federal Supreme Court published in the week from 1 - 7 October 2018.

Judgment of 10 September 2018 (2C_666/2018): Direct Federal Tax, State and Municipal Taxes 2010 and 2011 (Zurich) (3rd course of law); in the case of publication of an order or decision in the cantonal gazette pursuant to Art. 116 para. 2 DBG, service is deemed to have been effected on the day of publication; the taxpayer has submitted a complaint in his appeal of 29. The court of first instance declared on 29 January 2018 that it was not possible for him to substantiate the "objections" and to formulate precise applications, as the Consulate General was about to close; he was therefore fully aware that applications and a statement of reasons were necessary; the lower instance thus recognised in conformity with federal law that the submission of 29 January 2018 was insufficiently substantiated, that no period of grace was to be set and that the appeal was not to be granted; dismissal of the appellant's appeal, in so far as it is upheld

Judgment of 11 September 2018 (2C_720/2018): State and Municipal Taxes 2014 (Zurich) (Revision); in the case of a discretionary assessment, nullity only exists if the assessment authority deliberately and arbitrarily assesses the taxable profit or the discretionary surcharge to the detriment of the taxpayer. deliberately and arbitrarily assesses the discretionary surcharge to the detriment of the taxpayer; there can be no question of this in the present case; the lower court first took into account that the inventories and the property, plant and equipment had been derecognized at book value; since the company had only been founded in mid-2012 and the goods could hardly have been demolished, it is obvious that a set-off had to be made; the inventories of value indisputably went to the affiliated company, which is why the legal transaction had to satisfy the third-party comparison ("dealing at arm's length"); the assumed gross profit margin of a net good 100% actually appears to be rather high and is not likely to correspond unconditionally to market conditions, especially since it should be borne in mind that the loss carryforward was also covered; however, how this was dealt with in detail would have been a matter for the proof of incorrectness; dismissal of the appellant's complaint.

Judgment of 17 September 2018 (2C_313/2018): Cantonal and communal taxes 2014 (Geneva); According to Art. 9 para. 4 StHG, "other social deductions" of cantonal law are reserved. In the present case, the Geneva Court of Justice, in application of its settled case-law on Article 39(2)(c) LIPP v CE, and in particular on the concept of 'proches incapables de subvenir entièrement à leurs besoins', has held that the applicant cannot claim a deduction because her sister, who has been refused an extension of her residence permit and who is therefore no longer able to work in Switzerland, is not covered by that concept. The court recalled that the cases in which a needy relative could constitute a family burden relate to an inability of the person to earn a living because of his or her age, or to a specific disability, whether physical, mental or intellectual. Where the Cour dejustice considers that a purely administrative obstacle does not allow the person concerned to be considered a dependant in need, it does not act arbitrarily (E. 3). Dismissal of the appellant's appeal.

Judgment of 17 September 2018 (2C_455/2017): Cantonal and communal taxes 2006-2009 (Jura); sentencing of the complainant to pay compensation for lost profits within the meaning of Article 423 of the Swiss Code of Obligations (OR) as a result of a criminal conviction, among other things, for infringement of copyrights In the absence of the recognition of a provision in the relevant tax periods, it is not necessary to examine whether a deduction for such a compensation payment would be permissible due to the principle of materiality. Dismissal of the appellants' appeal.

Judgment of 6 April 2018 (2C_826/2016): Value Added Tax (VAT); tax object 2013; no sufficient indications of the existence of an exchange of services relationship result from the Framework Agreement 2013-2016 and the Service Agreement 2013 between Antidoping Switzerland (respondent) and the Federal Office of Sport (FOSPO). The agreements leave Antidoping Switzerland so much leeway in the performance of its work that no specific consideration is given. On the basis of Art. 29 lit. b MWSTV, the contributions are therefore to be assessed as subsidies for VAT purposes and, in the absence of a benefit, they do not constitute remuneration within the meaning of Art. 18(2) lit. a MWSTG; dismissal of the FTA's appeal.

Judgment of 10 September 2018 (2C_191/2018): duty; failure to reply to a request for reconsideration; the appeal is dismissed in so far as it is relevant.

Judgment of 18 September 2018 (2C_799/2017, 2C_800/2017): Direct Federal Tax and State and Municipal Tax 2005-2009 (Zurich) and Direct Federal Tax and State and Municipal Tax 2010-2013 (Zurich); the wife, who is not taxable in Switzerland, was wrongly included in her husband's (after-)tax proceedings (joint and several liability); natural persons without tax residence or domicile in Switzerland are not liable for tax under Art. 4 para. 1 lit. c DBG as the owner of real estate or, pursuant to Art. 5 para. 1 lit. a DBG, taxable in Switzerland in the exercise of a gainful activity on the basis of economic affiliation; since the wife was not gainfully employed in Switzerland, she could only become taxable in relation to the real estate, but not for the gainful activity exercised by the husband (art and antiques trade). The Federal Supreme Court states: "In contrast to the inter-cantonal relationship (see BGE 141 II 318), Art. 9 DBG cannot, in practice, establish joint taxation of spouses in international relationships. [...] In the cases assessed by the Federal Supreme Court to date, the other spouse was not taxable at all in Switzerland. However, this practice is to be applied analogously to the present situation, where the wife is taxable in Switzerland, but only to a limited extent due to economic ties". The appeals are upheld to the extent that they are admissible and the matter is referred back to the Cantonal Tax Office Zurich for a new assessment or to the Administrative Court for a new ruling on the consequences of costs and compensation.

Judgment of 7 September 2018 (2C_848/2017): Tax sovereignty (Zurich); determination of the tax domicile of a company; the appeal is dismissed to the extent that it is relevant.