Overview of tax law decisions of the Swiss Federal Supreme Court published between February 6 - 12, 2023:

  • Judgment of 16 December 2022 (2C_368/2022): VAT 2011-2015; the A. AG mainly aims at the construction and operation of mountain railroads and sports facilities. It is disputed which VAT consequences result from the fact that the creditors under public law were willing to waive their claims against the taxpayer in the 2012 tax period on the occasion of the reorganization. For the question whether there was a contribution under public law (Art. 18 para. 2 lit. a VAT Act 2009) or a waiver of claims (Art. 18 para. 2 lit. e VAT Act 2009), the nature of the claim is of central importance. It is obvious that it is not one of the core tasks of a local community to financially support the mountain railroad located in the village. Consequently, public-law objectives must already have been in the foreground at that time. The findings of the lower court show that the public-law lenders were not compensated with a participation. It is clear from the files that a significant number of jobs would have been lost without the restructuring. Against this background, the lower instance concluded in accordance with federal law that there was a flow of funds pursuant to Art. 18 para. 2 lit. a VAT Act 2009 with the consequence that the input tax is to be reduced proportionately pursuant to Art. 33 para. 2 VAT Act 2009. Dismissal of the appeal of the taxpayer A. AG.
  • Judgment of September 13, 2022 (2C_876/2020) - intended for publication: VAT 2018-2020; input tax deduction on deconstruction/demolition work; after discontinuing its operational activities, B. AG wanted to develop a residential superstructure on its formerly operationally used factory property and sell it to an investor. For this purpose, it leased the site to third parties on a temporary basis in the sense of an interim use until the start of the demolition work and opted for the leasing service. Shortly after the start of the interim use, B. AG sold the site to A. AG. The disputed issue in the present case is whether the purchaser A. AG can claim input tax for the costs incurred in connection with the deconstruction of the factory property. The FAC concluded that for the assessment of the right to deduct input tax, the VAT qualification during the "operation" phase of the former owner B. AG is decisive for the question whether A. AG can claim input tax (a building passes through the following phases: "construction", "operation", "demolition"/"sale"). Since the factory property had previously been used by B. AG for activities subject to VAT, A. AG was also entitled to deduct input tax. In doing so, the FAC essentially relies on the ruling of the BGer of October 27, 2017 (2C_166/2016) (see our article of November 19, 2017). In contrast, the BGer holds, in agreement with the FTA, that only the previous owner can rely on the previous VAT treatment of the phase "operation" in case of a deconstruction (in this case B. AG). For the new owner (in this case A. AG), however, the previous use is irrelevant, since from its point of view the deconstruction is the first step of the "construction" phase. In the "construction" phase - in contrast to the "demolition/sale" phase - it is not the previous use for VAT purposes that is decisive, but the future planned use. Since in the present case this consists of the construction of non-optional living space, the input tax deduction right of A. AG is accordingly not given. Also, the only temporary (opted) interim rental is not sufficient for the deconstruction to qualify as a "demolition/sale" phase. This is because, from the point of view of A. AG, the time-limited interim letting does not yet represent an independent "operation" phase. Approval of the appeal of the FTA.
  • Judgment of December 27, 2022 (2C_254/2022): Real estate gains tax 2019 (Graubünden); in dispute is where the taxpayer was domiciled at the time of the replacement acquisition in 2018. She claims that in the years 2011 to 2018 she lived with her cohabiting partner in the property in U. (sold in 2019) and had her center of life there. However, for the current taxes, the tax authorities involved have always located the taxpayer's residence in W., which the taxpayer has actively promoted with her tax returns. The taxpayer is therefore behaving contradictorily if she now claims, in the context of the assessment of the real estate gains tax, that she had in fact been domiciled in U. for all those years. It is therefore not objectionable that the lower court, based on its own findings (no deregistration in W., analysis of cash withdrawals at ATMs and bank card statements, consideration of the family situation), assumed that the taxpayer had been domiciled in W. and not in U.. As a consequence, the taxpayer does not meet the residence requirement for a deferral of the real estate gains tax pursuant to Art. 44 para. 1 lit. a StG/GR. Dismissal of the taxpayer's appeal.
  • Judgment of December 29, 2022 (2C_1019/2020): Kantons- und Gemeindesteuern 2009 (Aargau); In the present case, it is disputed whether two losses from property sales claimed by the taxpayer are to be taken into account for income tax purposes. The lower court has rightly determined that in the first case the sales proceeds achieved correspond to the market value at the time of the purchase of the property and therefore there is no tax deductible loss. The added value paid at the time of purchase had thereby accrued to persons close to the taxpayer. Secondly, the lower court denied the taxpayer the pro rata deduction of a loss from a property sale made together with a business partner. It was clear from an assignment agreement already signed at the time of the purchase that the taxpayer lacked the beneficial interest in the property in question. According to the Federal Supreme Court, this finding is at least not obviously incorrect. Dismissal of the taxpayer's appeal.
  • Judgment of 18 January 2023 (9C_616/2022): Direct Federal Tax and State and Municipal Taxes 2013-2014 (Zurich); fiction of service; The lower court rightly did not hear the appeal because the time limit had expired. If registered mail is not collected, the fiction of delivery applies. The taxpayer does not assert any grounds for restoring the time limit and none are apparent. Dismissal of the taxpayer's appeal.

Decisions on non-admission and write-offs:

Corrigenda to CW 5 - 2023 (best thanks for the tip from the readership):

  • Judgment of January 16, 2023 (2C_877/2021): Direct Federal Tax and Cantonal and Municipal Taxes 2016 (Geneva); In dispute is whether the taxpayer A. AG made a hidden profit distribution by receiving a loan from its shareholder in 2016 at an interest rate of 4.35%. The lower court assumed a hidden profit distribution, as the interest rate deviated too firmly from the interest rates provided for in the circular of the FTA. The court applied an interest rate of 1.5% to the complainant (interest rate for a first-ranking real estate loan). The complainant argued that the contract it had concluded with its shareholder was a normal loan agreement and not a real estate loan agreement, and that it also stood up to a third-party comparison. The Federal Supreme Court could not agree with this view, as the interest rates of the third party offer were only approximately fixed and still have to be negotiated. Thus, these cannot correspond to the interest rates of the free market. Dismissal of the appeal of the taxpayer A. AG.

Decisions are listed chronologically by publication date.