Decisions of the Swiss Federal Supreme Court (CW 47 - 2023)

Overview of the tax rulings of the Swiss Federal Supreme Court published between November 20 - 26, 2023:

Judgment of October 24, 2023 (9C_636/2022): State and communal taxes 2016 (2016); intercantonal double taxation; at issue is whether taxpayer A is subject to unlimited tax liability in the canton of TI as of January 1, 2016. He raises a number of formal objections with which he does not prevail. The findings of the lower court show that A's professional, economic and social ties to the canton of ZG are very weak. Based on the findings made by the lower court, which are binding for the BGer, it is clear that the main tax domicile is in the canton of TI. The rented 1.5-room apartment in the canton of ZG cannot prove the contrary. Dismissal of the appeal of A.
Judgment of November 8, 2023 (9C_371/2023): Cantonal and communal taxes 2010-2011 (Vaud); at issue was whether the tax claims for the years 2010 and 2011 were already time-barred or whether the lower court was right to assume that the various actions of the tax authorities had interrupted the relative limitation period of the tax claims. The appellant does not show that the solution chosen by the lower court would be arbitrary with regard to cantonal law. Dismissal of the taxpayer's unfounded appeal.
Judgment of October 18, 2023 (9C_204/2023): State and municipal taxes 2020 (St. Gallen); the divorced taxpayer shares parental custody of the two joint children with his ex-wife and custody is exercised alternately with half of the children being cared for. The taxpayer claimed before the Federal Supreme Court that - in addition to the deduction for maintenance contributions - he should also be granted half of the child and insurance deductions as well as the parental rate. The Federal Supreme Court confirmed its established case law according to which parents who are taxed separately may not cumulate the child deduction and the deduction for alimony payments for the same child. The prohibition of cumulation applies even if the children are in the alternating care of both parents. Furthermore, half of the insurance deduction and the parental rate were also denied. Dismissal of the taxpayer's appeal.
Judgment of November 18, 2023 (9C_696/2022): Direkte Bundessteuer und Staats- und Gemeindesteuern 2017 (Bern); as in the judgment 9C_204/2023 published on the same day, the Federal Supreme Court confirmed - in the case at hand, which is practically identical - the prohibition of cumulation, according to which parents who are taxed separately may not cumulate the child deduction and the deduction of alimony payments for the same child and the prohibition of cumulation applies even if the children are in the alternating care of both parents. Since the child deduction is linked to the parental rate and the insurance deduction, the taxpayer cannot claim either the parental rate or the insurance deduction due to a lack of entitlement to the child deduction. Dismissal of the taxpayer's appeal.
Judgment of October 26, 2023 (9C_335/2023) - scheduled for publication: Real estate gains tax 2016 (Zurich); in this case, the testator sold a property to an AG during his lifetime at a below-market price, which he controlled in terms of votes, whereby he indirectly held 25% of the capital and his heirs 75%. The tax office of the city of ZH levied property gains tax on the difference between the investment costs and the estimated market value, which the lower court upheld. According to the Federal Supreme Court, the lower court violated harmonized real estate gains tax law by adding the full difference between the sales price and the market value of the property or the corresponding total increase in value of the investment held to the proceeds on the one hand, but rejecting a tax deferral due to a mixed gift (to the heirs) on the other. The leeway that the Canton of ZH enjoys in the definition of proceeds allows it to understand this term in economic terms and also to include the increase in value of the shares held in the proceeds as a sale at a lower price, even if this increase in value ultimately occurred on third-party shares. However, the canton of ZH must then also adopt an economic approach to the question of whether the sale is to be qualified as a (mixed) gift within the meaning of § 216 para. 3 lit. a StG/ZH. The matter must therefore be referred back to the lower court, as it or the canton of ZH is responsible for deciding whether, under cantonal real estate gains tax law, the proceeds should be limited to the sale price plus the increase in value of the deceased's shares or whether, in light of the increase in value of the heirs' shares, a mixed gift should be assumed and a (full) tax deferral granted for this reason. For the sake of clarity, it should be noted that the tax deferral in the case of a mixed gift - as well as the addition of a hidden capital contribution - is not excluded under harmonization law if the difference between the sale price and the market value is less than 25%. With regard to the protection of legitimate expectations, which was also discussed, the Federal Supreme Court clarified that the principle of legality in tax law does not require an additional weighing of interests in order to grant protection of legitimate expectations. However, the protection of legitimate expectations was denied due to a lack of proven information. The appeal of the heirs is partially upheld and the judgment of the VGer ZH is set aside. The case is referred back to the lower court for a new decision in line with the considerations.
Judgment of October 31, 2023 (9C_216/2023): Direct federal tax and state and communal taxes 2008 and 2010 (Vaud); taxation of employee stock options; insofar as employee stock options were taxed at the time of allocation (canton of Vaud), they cannot be taxed again at the time of exercise due to the prohibition of double taxation (canton of Neuchâtel). Appeal upheld.
Judgment of November 6, 2032 (9C_722/2022): Staats- und Gemeindesteuern 2016 (St. Gallen), inter-cantonal double taxation; the lower court had confirmed the tax jurisdiction of the Canton of SG based on the actual administration at the domicile of the managing partner; this assessment of the lower court does not appear to be manifestly incorrect, even if it would also have been arguable based on the activities of the other shareholders that the company was actually administered at its statutory domicile in the Canton of SZ. In the absence of qualified abuse and particular impairment of the interests of the Canton of SZ (see the judgment of 17 August 2023 (9C_710_2022) and our article on this subject of 17 September 2023), the Canton of SZ's objection of forfeiture proves to be unfounded. Dismissal of the taxpayer's appeal against the Canton of SG, approval of the appeal against the Canton of SZ. The assessment rulings of the Canton of SZ for the 2016-2018 tax periods must be revoked. The Canton of SZ is obliged to reimburse the company for the taxes paid for these tax periods.