Decisions of the Swiss Federal Supreme Court (CW 47 - 2020 )

Overview of the tax law decisions of the Swiss Federal Supreme Court published in the week of 16 - 22 November 2020.

Judgment of 8. October 2020 (2C_443/2020): VAT; services between related parties; A GmbH runs an architectural office; E GmbH and D GmbH (both related to A GmbH) provide real estate services; FTA justified a VAT claim against A GmbH by stating that D and E GmbH could not provide their business activities without personnel and movables, consequently A GmbH would have provided services to the two companies which were neither accounted for nor taxed by A GmbH; the FTA applied the resale price method to determine the third party price of the services; A GmbH was unable to prove that the assessment of evidence was arbitrary; in the absence of documentation, the resale price method is often the only practicable method of determining a third party price; dismissal of the complaint by A GmbH (see also our contribution of 7 July 2006); and June 2020).
Judgment of 13 October 2020 (2C_456/2020): Direct Federal Tax and State and Municipal Taxes 2015 (Valais); Deductibility of legal fees for the judicial enforcement of the retransfer of the payout ratio to the taxpayer's property as maintenance or administrative costs; legal fees and court costs may constitute deductible maintenance or administrative costs if the expenses serve to secure the property or its use; This is in particular the case if the expenses are incurred in connection with the retransfer of the payout ratio to the taxpayer's property. This is particularly the case if these costs contribute to averting an impairing reduction in the rate of utilisation; it is assumed that the corresponding proceedings do not appear to be obviously futile; the Federal Supreme Court upheld the finding of the lower court, which concluded that the lawyer's fees involved in the dispute should be recognised as maintenance and administrative costs that preserve value; dismissal of the appeal by the cantonal tax administration.
Judgement of 20 October 2020 (2C_526/2020): Direct federal tax and state and municipal taxes 2015 (St. Gallen); Offsetting of monetary benefits within the scope of the zero assessment; If the tax office determines the taxable profit to be CHF 0, taking into account the offsetting of losses, the taxable legal entity has no interest in a declaratory judgment or in legal recourse that would entitle it to contest the assessment. The amount of the loss on which such an assessment decision is based is not legally determined but must be reviewed in the subsequent period in which a taxable profit is assessed. The taxpayer's appeal will be rejected.
Judgment of 10 November 2020 (2C_234/2020): Direct Federal Tax and State and Municipal Taxes 2011 (Vaud); An AG was established by means of a contribution in kind by transferring the assets and liabilities of a sole proprietorship. The dispute is whether the 5-year time limit was violated when the assets of the sole proprietorship were transferred to the AG. The taxpaying spouses entered into an inheritance agreement with their children on March 7, 2013. This stipulated that the newly established AG should be sold by a separate contract on 30 June 2016 to a third party company at a price of CHF 3,351,817, which corresponds to the market value. Until June 2016, the taxpayer remained the owner of the shares and received regular dividends and he retained his status as chairman of the board of directors. Thus, at the time the inheritance agreement was entered into in 2013, the taxpayer neither sold the shares nor received any compensation for them. Therefore, the 5-year time limit was not violated and there was a tax-neutral reorganization. Approval of the taxpayer's appeal.

Non-entry decisions: