Overview of the tax law decisions of the Swiss Federal Supreme Court published in the week of 18 - 31 December 2017.

  • Judgment of 30 November 2017 (2C_1135/2016, 2C_1136/2016), official publication provided: Direct Federal Tax and State and Municipal Taxes 2013 (Zurich); loss offset; the cost nature of inheritance taxes owed by the complainant (A. AG) on the acquisition of properties from the estate of her deceased shareholder; in principle (and contrary to the view of the previous instances) inheritance taxes qualify as business expenses within the meaning of Art. 59 para. 1 lit. a DBG; however, no taxable profit arises from the capital gain from inheritance (Art. 60 lit. c DBG); in the opinion of the Federal Supreme Court, the net increase in capital due to inheritance (value of the inherited properties less the inheritance tax paid on them) is considered to be capital growth; consequently, the tax-free capital growth is not the entire value of the inherited property, but the actual value of the inherited properties without mortgages less inheritance tax; Art. 60 lit. c DBG aims to ensure that the Company is taxed on the basis of its own value added: "Art. 60 lit. c DBG provides for the inheritance to be settled without affecting profit for profit tax purposes, since capital gains from inheritance are funds which the Company has not generated itself. If, in addition to the inheritance tax [...], the gross capital gain (i.e. the total value of the inheritance) is deducted from the commercial law profit, the inheritance no longer meets this requirement. Rather, the result is that the amount of inheritance tax is corrected twice and the taxable profit is too low or the loss too high, as the present case shows. (E 4.3.); correctly, in the opinion of the Federal Supreme Court, the provision for inheritance tax pursuant to Art. 59 para. 1 lit. a DBG should be deducted as an expense, whereas the capital gain pursuant to Art. 60 lit. c DBG should only be taken into account net and not gross; the appeal is dismissed.
  • Judgment of 6 December 2017 (2C_107/2017): State and municipal taxes 2009 (St. Gallen); deductibility of losses from the operation of a bird of prey park; distinction hobby vs. self-employment; In the present decision, it was questionable "whether it can be assumed with the lower court that the long-standing recognition of the losses by the tax authorities created a basis of trust that would have a lasting effect on the assessment of the 2009 tax period, which obliged the assessment authority to announce the intended new assessment of the facts to the respondents and to give them the opportunity to give up the business, to organise it in such a way that the generation of taxable income would be realistic, or to convert it into a legal form that would be accessible to tax exemption.» (E 3.2.); according to the opinion of the lower court, the question of the offsetting of losses from the operation of the park of birds of prey in the previous years (from 2001) was never questioned, which is why under these circumstances (despite the fact that the assessment authority was not bound by the previous assessments) a "basis of trust which will continue to have an effect for a certain period of time" can be derived from the long-term recognition of the operation of the park of birds of prey as a self-employed activity (cf. E 3.2.2. as well as the decision of the Administrative Court of the Canton of St. Gallen of 20 December 2016, E. 2.4.2 f.; see also Hanspeter Saner/Marlene Kobierski, EY Tax News Sommer 2017 p. 6 f. ); although the Federal Supreme Court acknowledges that the period-based approach to longer-term facts can impair tax planning security, it states that this cannot lead to the assessment authority having to grant the taxpayer an adjustment period; in the absence of concrete assurances regarding the tax treatment of the birds of prey park, there is a lack of a sufficient basis of trust from the outset within the meaning of Art. 9 BV: 'The respondents, whose accounts were also drawn up by trust companies, were inevitably faced with the question of their future qualification as self-employed workers because of the annually recurring, usually substantial losses. The fact that the tax authority could at any time arrive at a different assessment of its activities in connection with the park of birds of prey in the context of period-related assessments was therefore apparent to it, which is a further prerequisite for invoking the general protection of legitimate expectations within the meaning of Article 9 of the Federal Constitution. (E. 3.3.1.); in addition, the Federal Supreme Court states: "The fact that the profitability of an activity can only be reliably assessed after a certain observation period does not, against this background, lead to an obligation of the assessment authorities to point out to the taxpayer a possibly different qualification of his activity in later tax periods or to grant him an adjustment period. (E. 3.3.2.); in the opinion of the Federal Supreme Court, the question of possibly disloyal behaviour on the part of the assessment authority could at most arise "if a loss-making activity is recognised as self-employment over a longer period of time and the tax authority then waits an unreasonably long time before assessing the tax for subsequent years in such a way that the taxpayer believes that the losses will continue to be accepted". (E 3.3.3.3); such a circumstance does not, however, already lie in the hesitant execution of an assessment, but rather, in the opinion of the Federal Court, additional circumstances are required which make the conduct of the tax authorities appear to be a downright abuse of rights; the appeal of the Cantonal Tax Office of St. Gallen is upheld and the ruling of the Administrative Court of the Canton of St. Gallen of 20 December 2016 is set aside.
  • Judgment of 13 December 2017 (2C_722/2017): Direct federal tax and state and municipal taxes 2001 - 2009 (Geneva); creation of a foreign discretionary trust, the trustee of which is a company controlled by the taxpayer; qualification of the structure as tax avoidance. Post-tax and tax evasion proceedings in relation to tax periods not subject to the statute of limitations; partial approval of the complaint.
  • Judgment of 5 December 2017 (2C_674/2016, 2C_675/2016): Direct federal tax and state and municipal taxes 2006 - 2009 (Geneva) and judgment of 5 December 2017 (2C_676/2016, 2C_677/2016): Direct federal tax and state and municipal taxes 2005 (Geneva); after-tax procedure pursuant to Art. 151 DBG with regard to non-cash benefits (simulated loans between shareholders and the company); if a z.B. if a department responsible for legal persons has certain information, another department of the tax administration is presumed to have knowledge of this information only if communication has actually taken place; the tax administration has a burden of proof in this respect.
  • Judgment of 7 December 2017 (2C_987/2017): Direct federal tax and state and municipal taxes 2014 (Thurgau), the application for restitution of the missed deadline was rejected in accordance with federal law; the appeal is dismissed.
  • Judgment of 13 December 2017 (2C_853/2017): Direct federal tax and state and municipal taxes 2002 (Berne); after-tax and criminal tax proceedings as a result of a payment in kind in favour of the managing sole shareholder of an AG; no violation of the right to be heard; no occurrence of the forfeiture period regarding the right to initiate after-tax proceedings; no official assurance is apparent from which it could be inferred that the post-tax proceedings had been discontinued; no case of the prohibition of contradictory conduct (venire contra factum proprium); the substantive-law assessment of the previous instance regarding the existence of a payment in kind proves to be in conformity with federal law; the appeal is dismissed.
  • Non-occurrence decisions / inadmissible complaints:

Decisions are listed chronologically by publication date.

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