Decisions of the Swiss Federal Supreme Court (CW 51-52 - 2021)

Overview of the tax law decisions of the Swiss Federal Supreme Court published between 20 - 31 December 2021.

Judgment of 30 November 2021 (2C_259/2021): Direct Federal Tax and State and Municipal Taxes 2006-2015 (Bern); Contrary to the complainant's view, the alleged violation of the right to be heard cannot be described as particularly serious. Although the lower instance had appreciated the telephone note contained in the post-tax file concerning the over-indebtedness of the complainant's father, it had ultimately not considered it to be decisive and had not found the discretionary assessments to be null and void. In particular, the knowledge of the Inheritance, Gift and Subsequent Tax Department could not be attributed to the assessment authority, which was why the discretionary assessments did not appear to be crassly arbitrary in the present case and there was also no ground for appeal. Dismissal of the taxpayer's appeal.
Judgment of 3 December 2021 (2C_141/2020/2C_245/2021) - official publication planned: Revocation of a tax relief; A. GmbH, domiciled in the Canton of Vaud, benefited for ten years (2005-2014) from a tax relief (specifically: taxation at 0% for 10 years), which was subject to precisely circumscribed conditions. In 2020, it merged with B. AG. It is disputed which period is affected by a revocation of the tax relief and, accordingly, an additional tax payment. Tax relief is a contract under administrative law. In this contract, the tax exemption of A. GmbH was, among other things, linked to the condition that the registered office and the activities of the company must remain in the canton of Vaud for a period of ten years after the expiry of the tax relief, i.e. until 2024. However, the lower cantonal court found that Vaudois law did not contain any provision specifically dealing with the revocation of tax relief decisions and concluded that revocation must follow the system provided for in Art. 53 StHG and the conditions of subsequent taxation with a ten-year limitation period. The cantonal court took its cue from the ruling 2C_382/2016, in which, however, the revocation of a tax exemption with unclear conditions was to be decided. Here, the case was different from that in ruling 2C_382/2016, as the tax exemption was subject to clear and unambiguous conditions. Contrary to the opinion of the Cantonal Court, the Federal Supreme Court, applying the clear wording of the contract under administrative law, ruled that, with regard to the tax relief granted, the State Council undoubtedly had the possibility to claim all the taxes not paid by A. Ltd during ten years in the canton. If the tax relief agreement links the obligation to establish and maintain activities in the canton after the exemption period to clear time limits, only these limits are authoritative, subject to any provisions of cantonal law. They conclusively regulate whether it is still possible to retroactively revoke the tax privilege dependent on them and thus to claim all unpaid taxes due to this privilege. There is then also no room for applying the rules on subsequent taxation. Appeal of the Canton of Vaud upheld.
Ruling of 19 November 2021 (2C_648/2020): Direct federal tax and state and communal taxes 2014 (Valais); Indirect partial liquidation; In this case, brother C died in 2013. Together with brother B, he held half of C AG and half of D AG. In the same year, brother B founded E AG, to which he contributed all participations except the shares in D AG. In 2014, he sold the shares in D AG to the heirs of C. In 2014, they sold the shares in C AG to his E AG. Brother B contributed his claims against the heirs a few days later to E AG, which offset them against the purchase price of C AG. In 2015, C AG distributed a substantial dividend. The widow A was rightly assessed income from movable assets (her share in the non-operating substance of C AG) in the after-tax procedure in 2014. As the sister-in-law of the sole owner, she could have clarified the purchasing power of E AG, in particular since she had to expect that a newly established company would not have the funds of the purchase price. Dismissal of the taxpayer's appeal.
Judgment of 8 November 2021 (2C_660/2020): Value added tax (2013); In the transactions described by the complainant as "tree sales", no economic power of disposal is granted to the customers and thus no supply is made pursuant to Art. 3(d)(1) VAT Act. The services provided by the complainant are exempt from tax and the corresponding input tax deduction (in connection with these services) is therefore excluded. Dismissal of the taxpayer's appeal.
Judgement of 19 November 2021 (2C_679/2020): Direct Federal Tax and State and Municipal Taxes 2014 (Solothurn); The dispute in this case is whether the horse business is a hobby or an independent gainful activity. Since the horse breeding was abandoned and later no more riding lessons were offered, a self-employed gainful activity is to be denied. In addition, they had many more horses than were needed for riding lessons, which shows that the keeping of the horses was mainly privately motivated. The lower court was allowed to consider this as a hobby with the consequence that losses are not deductible. Dismissal of the taxpayers' appeal.
Judgment of 29 November 2021 (2C_582/2021): Direct federal tax and state and municipal taxes 2014 (Thurgau); in dispute is whether the replacement of the swimming pool and the retaining wall including gardening qualify as deductible maintenance costs. According to the lower court, the dismantling of the retaining wall for the new pool and the renovation claimed by the complainants is equivalent to a total renovation of the pool in terms of scope and to a new construction in economic terms, which is why the costs claimed for this are to be qualified as non-deductible production costs. The reinforcement and raising of the new retaining wall became necessary due to the new construction of the swimming pool and is therefore part of the total renovation. The same applies to the newly paved square and the redesign of the garden. Thus, the other environmental designs are also non-deductible production and investment costs. Dismissal of the taxpayer's appeal.
Judgment of 8 December 2021 (2C_791/2019): State and municipal taxes and direct federal tax 2006-2008 (Ticino); Transparent taxation of a family foundation; In the present case, the question arose whether the amendments to the articles of association (2007 and 2011) adopted by the board of trustees were not only possible but also allowed the foundation to be converted into a family foundation within the meaning of Art. 335 CC or into a normal foundation. Initially, the amendments are not to be examined retroactively. Furthermore, the amendments to the articles of association were in fact only adopted and notarised in 2011, which is why they are irrelevant for the tax periods at issue. Dismissal of the taxpayer's appeal.
Judgment of 17 December 2021 (2C_1010/2021): State and municipal taxes and direct federal tax 2006-2012 (Geneva); back taxes and tax evasion; In the present case, the cantonal tax administration has no room for manoeuvre. The contested judgment is therefore to be qualified as a final decision, so that the lack of reasons does not lead to its inadmissibility. The appellant argues in vain that the number of files and the complexity of the case and the high amount in dispute justify the award of a party fee of CHF 10,000.00. She loses sight of the fact that the annulments of the back taxes and fines are due to the statute of limitations and not to the relevance of her writings. Dismissal of the taxpayer's appeal.
Judgment of 10 December 2021 (2C_960/2021): State and municipal taxes and direct federal tax 2014-2019 (Ticino); appeal; the appellants themselves admit in particular that they submitted their tax returns incorrectly; dismissal of the taxpayers' appeal.
Judgment of 17 December 2021 (2C_648/2021): State and municipal taxes and direct federal tax 2018 (Valais); The cantonal tax office wrongly held that the taxpayer could drive to Martigny and then use public transport to reach her workplace. It reduced the travel costs deducted, although there was a time saving of one hour. Dismissal of the tax administration's appeal.
Judgment of 20 December 2021 (2C_524/2021): Staats- und Kommundesteuern und direkte Bundessteuer 2011 (Waadt); The appellant does not deal with the reasoning of the contested judgment in order to explain even briefly how it is supposed to be in violation of the law. The objections are therefore inadmissible. Dismissal of the taxpayer's appeal.
Judgment of 22 December 2021 (2C_837/2021): State and municipal taxes and direct federal tax 2011 and 2014-2016 (Valais); non-payment of the advance on costs; restoration of time limits; dismissal of the taxpayer's appeal.