Decisions of the Swiss Federal Supreme Court (CW 49 - 2021)

Overview of the tax law decisions of the Swiss Federal Supreme Court published in the week of 6 - 12 December 2021.

Judgment of 24 November 2021 (2C_953/2020): Administrative assistance DTA CH-KR; Switzerland frequently receives requests for administrative assistance where the persons concerned claim tax residence in a third country in order to oppose the transmission of information to the requesting state. The dispute in this case was whether the Federal Administrative Court was right to annul the final ruling of the FTA on the grounds that the Korean request for administrative assistance concerning A. was an inadmissible "fishing expedition". The Federal Supreme Court made it clear that the determination of tax residency is a question of principle that requires a detailed examination of the situation and is not and cannot be dealt with by Switzerland as the requested state in the context of administrative assistance. Switzerland can only assess this for a person resident for tax purposes in its territory. In the present case, the request at issue identifies A. as a Korean taxpayer who is the subject of a criminal investigation in Korea. The probable materiality is thus given. The application contains clear information showing that Korea assumes that A. has unlimited tax liability there. Contrary to the opinion of the lower court, the tax residency does not have to be questioned. The certificate submitted by A., which is supposed to prove his tax residence in Indonesia, is not relevant. This would have to be clarified by the competent authorities of the states concerned on the basis of the delimitation rules in a possible DTA between Korea and Indonesia. Appeal of the FTA upheld.
Ruling of 11 November 2021 (2C_406/2021): Direct Federal Tax and State and Municipal Taxes 2015 (Bern); Tax exemption of lump-sum payments in the event of a change of job and deduction of purchases into the second pillar; Upon reaching the normal retirement age and giving up her salaried employment, the taxpayer spouse received a lump-sum payment in April 2015, which was recorded by the Bern Tax Administration in May 2015 with a special assessment that remained unchallenged. The spouse remained self-employed and insured with another pension fund (since 2014). The Bern tax administration did not allow a purchase made in December 2015 into this pension fund to be deducted. The complaining couple applied to the Federal Supreme Court for the purchase to be allowed as a deduction. The Federal Supreme Court held that insofar as a lump-sum payment is exempt from income tax under Art. 24 lit. c DBG, the corresponding purchase does not fall under Art. 33 para. 1 lit. d DBG and consequently cannot be deducted from taxable income. Whether a deduction can be claimed in this case therefore depends on the tax assessment of the lump-sum payment received in April 2015. According to the Federal Supreme Court, the reason for the payment of the lump-sum benefit (termination benefit or pension case) cannot be decisive for the application of Art. 24 lit. c DBG. The only decisive factor is whether the taxpayer changes jobs and returns the withdrawn funds to the occupational benefit scheme within one year. According to the Federal Supreme Court, by significantly expanding her self-employment after giving up her job, the complainant effected a change of job within the meaning of Art. 24 lit. c DBG. The Federal Supreme Court left open the question of whether a change of job would also be deemed to have taken place if the complainant had merely continued her self-employed activity and not expanded it. In conclusion, the Federal Supreme Court held that due to the change of job and the purchase into the second pillar within one year, the retirement capital benefit paid out was exempt from tax to the corresponding extent by virtue of Art. 24 lit. c DBG, but the purchase was not to be allowed as a deduction. The Federal Supreme Court left open whether the purchase would have been tax deductible if the complainant had not changed jobs or had waited more than one year before making the purchase. Dismissal of the appeal of the taxpaying spouses.
Judgment of 18 November 2021 (2C_476/2021): State and municipal taxes 2015-2017 (Zurich); tax withdrawal, tax refund; The deceased left five legal heirs in addition to his spouse. The spouse waived her claim to inheritance and compulsory portion. Upon the deceased's death, the spouses had to report a tax credit for the 2015-2017 state and municipal taxes, paid from a bank account to which the spouse claimed to have been the sole beneficiary. The Zurich tax office ordered that half of the tax credit (plus interest) be refunded to the spouse who was not (any longer) entitled to the inheritance and half to the community of heirs. The complaining spouse complained to the Federal Supreme Court that the application of section 180 of the Tax Act of the Canton of Zurich to the facts of the case was arbitrary and therefore violated Article 9 of the Federal Constitution. According to the Federal Supreme Court, the analogous application of § 180 StG ZH to the facts of the case is not arbitrary. Dismissal of the spouse's appeal.
Judgement of 2 November 2021 (2C_825/2020): Customs; additional demand order. A AG was authorised to import oil for the manufacture of certain products at preferential rates of duty (Art. 14 para. a ZG in conjunction with Art. 51 ZV). A AG did not comply with the obligation to use the oil. D AG, as importer of the oil for A AG, should not have reduced the duty on the goods accordingly. A AG thus acquired the oil below the market price and, as the beneficiary, is subject to an obligation to pay duty and import tax in arrears pursuant to Art. 12 VStrR. The granting of a licence to A AG in 2010 does not confer any right to protection of legitimate expectations; dismissal of the appeal.

Non-occurrence: