Decisions of the Swiss Federal Supreme Court (CW 45 - 2022)

Overview of tax law decisions of the Swiss Federal Supreme Court published between November 7 - 13, 2022:

Judgment of 22 September 2022 (2C_880/2021) intended for publication: Import duties; Cabotage; The present dispute revolves around the subsequent assessment of customs and import taxes for the trucks and semitrailer tractors used by A. AG, B. GmbH and C. Sàrl used in Switzerland trucks and tractor units that had not previously been cleared through customs and had not been taxed. It is disputed whether the complainants were allowed to use the temporary importation procedure within the meaning of Art. 9 ZG, Art. 58 ZG and Art. 53 para. 1 lit. k MWSTG, or whether they had to subsequently declare and pay tax on the trucks and tractor units. The question to be answered in the present proceedings is thus whether the attachment of a new and empty trailer, registered and duty paid in Switzerland, by a foreign truck, which has not paid duty and is untaxed in Switzerland, or the attachment of a new and empty trailer, registered and duty paid in Switzerland, by a foreign, tractor unit that is not duty paid and untaxed in Switzerland, the subsequent transport of this empty trailer or semitrailer within Switzerland and the unhitching or dropping off of this empty trailer or semitrailer at another location in Switzerland falls under the cabotage prohibition. According to the complainants, moving a newly picked up empty trailer or semitrailer within Switzerland does not constitute domestic transport. The Federal Office for Customs and Border Security argues that it already follows from Art. 2 para. 1 of the Istanbul Convention that trailers and semi-trailers are goods. The Federal Supreme Court holds that the wording of Art. 2 para. 1 and the systematic structure of the Convention with its Annexes speak in favor of the fact that means of transport are considered to be goods. Although the complainants correctly argue that Article 1(a) of Annex C to the Convention defines the concept of means of transport, they fail to take into account the fact that, for the interpretation of the concept of internal transport, a perspective must be adopted which is oriented towards the means of transport. This interpretation is also consistent with the purpose of the cabotage prohibition. It is a matter of systematic shifting of loading capacity within Switzerland, which domestic transport companies can regularly provide at less advantageous conditions. It is therefore a case of prohibited cabotage. Dismissal of the taxpayer's appeal.
Judgment of 13 October 2022 (2C_149/2022): Cantonal and communal taxes and direct federal tax 2012 (Vaud); assessment of an agreement between C. and the taxpayer in connection with a real estate project, described as a "convention de partenariat"; it can be concluded from the agreement that the parties never intended to share any losses in the context of the real estate project, but rather that the taxpayer had undertaken to secure a significant remuneration for C., irrespective of the success of the project. There is no animus societatis, which is why profit sharing is out of the question. Next, the taxpayer could not prove in any way that C. had engaged in any activity for the real estate development project. In this respect, the lower court rightly concluded that the payment made by the taxpayer to C. in the amount of approximately CHF 3.25 million (approximately half of its project profit) also does not constitute a business-related expense. In the present case, it is clear from the appealed ruling that the taxpayer declared a taxable income of only CHF 1.5 million in his 2012 tax return, although in that year he realized a gross profit of approximately CHF 6.5 million in connection with the real estate business in question. The fact is that he decided, among other things, to deduct the amount paid to C. from his income, but without stating this directly in his tax return. Only in the annex to his tax return he attached a document entitled "Settlement Route B. 2012", which leads to a "result" of about CHF 1.5 million, after deduction of certain "costs" which include the above mentioned payment. However, as mentioned above, this payment obviously does not correspond to the payment of a share of profits among shareholders. Nor does it constitute a tax deductible expense. Thus, the taxpayer has provided incorrect information to the assessment authority by not including the amount in question among its income, which of course could have resulted in an incomplete assessment. It is irrelevant in this case that the taxpayer did not conceal the existence of such payment in the documents accompanying his tax return and, in particular, in the document "Settlement Route B. 2012". At the very least, he should have clearly communicated to the tax authority the doubts he necessarily and seriously had about the deductibility of this unusual "commission" in an extremely high amount, since it represented more than half of the gross profit and its payment was made without consideration, especially since a few months later C.'s life partner himself made a deposit of CHF 1 million for unspecified purposes into the taxpayer's bank account. The taxpayer did not consider it necessary to draw the tax authority's attention to this point and insisted throughout the assessment proceedings, without any evidence, that C. had played an "extremely important role" in the said transaction, thus continuing to provide the tax authority with false information. The taxpayer was aware of the inaccuracy of the information he provided to the tax authority and had the intention to deceive the tax authority in order to obtain a lower assessment. Therefore, the conditions for attempted tax evasion were rightly considered to be met by the lower court. In this regard, the assessment of fault and the tax fine are also not objectionable. Dismissal of the taxpayer's appeal.

Non-occurrence: