Decisions of the Swiss Federal Supreme Court (CW 44 - 2022)

Overview of tax law decisions of the Swiss Federal Supreme Court published between October 31 - November 6, 2022:

Judgment of September 23, 2022 (2C_35/2022): State and municipal taxes 2008 to 2010 (Zurich); in the course of an audit conducted at A. AG in 2016, the Cantonal Tax Office of Zurich came to the conclusion that the statutory registered office of B. AG in Appenzell Ausserrhoden was merely a sham domicile and that the actual registered office of the company was located at the registered office of its sister company. In its ruling of October 1, 2019 (2C_592/2018), the Federal Supreme Court confirmed the tax jurisdiction of the Canton of Zurich for the tax periods 2011 to 2013. As a result, the Cantonal Tax Office of Zurich lifted the suspension of the post-tax proceedings for the tax years 2008 to 2010. Thereupon, the complainant requested that the after-tax proceedings be suspended again and that a preliminary ruling be issued to determine which canton was entitled to tax jurisdiction for the years 2008 to 2010. The Federal Supreme Court also concludes for the years 2008 to 2010 that only the statutory seat was located in Appenzell Ausserrhoden. As far as the revocation of the definitive tax assessments of the Canton of Appenzell Ausserrhoden is concerned, the appellant would have to accept the charge of having acted in bad faith, since the then representative made false statements to the tax administration of the Canton of Appenzell Ausserrhoden in October 2010. It would be obvious that the then tax representative had to be aware also with regard to the period from 2008 to 2010 that a conflicting tax claim existed in the Canton of Zurich, which is why no annulment of the assessments for the 2008 to 2010 cantonal and communal taxes of the Canton of Appenzell Ausserrhoden has to be made. Dismissal of the taxpayer's appeal.
Judgment of September 23, 2022 (2C_615/2021): State and municipal taxes 2017 (Lucerne); Intercantonal double taxation; In dispute is which canton (NW or LU) may tax the part of the business profit that the canton of residence NW claims for itself as remuneration for work. Income from self-employment earned in a business establishment with permanent facilities is taxable at the place of business. According to a long-established case law, income of a partner of a general or limited partnership from personal work for the partnership remains with the canton of residence. In the absence of an entry in the commercial register, the relationship between the complainant and her co-partner (both physiotherapists) can only constitute a general or limited partnership if they have united for the purpose of carrying on a trade, a manufacturing business or another business conducted in a commercial manner under a common name. In practice, the liberal professions are not considered to be a commercial business. However, according to practice, a commercially run business is to be assumed if the striving for economic efficiency takes precedence over the personal relationship with the patient or client. The Canton of Lucerne comes to the conclusion that the personal relationship with the patient is of primary importance for a physiotherapist. This is to be agreed with. In addition, the physiotherapy practice does not have its own website, but is listed in the online company directory and on telsearch.ch. The turnover of around CHF 695,000 is considerable. Nevertheless, there is no trade managed in a commercial manner. The canton NW does not present any evidence for its position that a general partnership or limited partnership exists. Approval of the complaint of the taxpayer against the Canton of Nidwalden.
Judgment of 27 September 2022 (2C_519/2022): User fees 2019 (Fribourg); The levying of a (volume-independent) basic fee in addition to a (volume-dependent) operating fee for water, wastewater and refuse confirmed by the lower court is not arbitrary. Dismissal of the taxpayer's appeal.
Judgment of September 28, 2022 (2C_530/2022): User fees 2014-2018 (Fribourg), free administration of justice; dismissal of the complaint of the fee payers.
Judgment of September 21, 2022 (2C_744/2021): Direct federal tax and state and municipal taxes 2015 (Valais); In dispute is whether the taxpayers may deduct the claimed costs for the renovation of both stables as maintenance costs. In practice, a total renovation, which is practically equivalent to a new building, constitutes a production from a tax perspective, which is why the associated costs are not deductible for income tax purposes. A complete reconstruction or extension of a property is also economically equivalent to a new building. Accordingly, a new building is considered to be economically viable if the investment volume exceeds the acquisition costs, so that it is considered to be a production cost. In all these cases, an overall assessment is applied and the deduction for all maintenance work carried out is to be denied. In the present case, the work carried out is very extensive and, in particular, roofs, walls, water pipes and septic tanks were renewed and a wall was rebuilt and the electricity connection was installed in the ground. In the present case, it is possible to speak of a comprehensive repair of the stables. Therefore, these are not maintenance costs. Approval of the complaint of the Wallis tax administration.
Judgment of 12 October 2022 (2C_305/2022): Water charges 2015-2018 (Appenzell Ausserrhoden); An administrative law agreement between the complainant (landowner), the local municipality and the Department of Health and Social Affairs of the Canton AR for the settlement of all claims under social welfare law and related proceedings is not capable of waiving the obligation of the landowner to pay water charges. If the communal law does not provide for a waiver of the water charges, the public authority has no decision-making discretion. The principle of legality dictates that the assessment authority "can and must" demand and obtain levy claims. Further, the complainant has failed to explain how the lower court violated the general prohibition of arbitrariness. Also, an action for a declaratory judgment should not open a "second legal recourse" for the person liable for the levy. Dismissal of the layman's complaint insofar as it is upheld.
Judgment of September 23, 2022 (2C_382/2021) - intended for publication: Direct Federal Tax 2017; Determination of Net Income; The Federal Supreme Court has ruled that legal fees incurred as a result of proceedings to enforce alimony payments are not to be deducted from income as profit costs. The diversity of issues involved in divorce proceedings prevents the establishment of a direct and close nexus between legal fees and income from alimony. Further, such a deduction would relativize the applicable congruence principle between former spouses that all corresponding benefits taxed to the recipient may be deducted by the contributor. Approval of the appeal of the FTA.
Judgment of 14 October 2022 (2C_639/2022): After-tax and tax penalty proceedings in the case of self-employment; Direct federal tax and state and municipal taxes 2007-2013; In the present case, the taxpayers had not maintained any accounts in connection with their respective self-employment activities over a longer period of time. It is incumbent on the appellants to prove that various loans from which they benefited would in fact have been neutral financial transactions. The tax administration has rightfully taxed loans whose origin and existence could not be suitably proven by the taxpayers as income within the meaning of the net asset access theory. Dismissal of the taxpayers' appeal insofar as it is to be upheld.