Decisions of the Administrative Court ZH (February and March 2022)

Overview of the tax law decisions of the Zurich Administrative Court published in February and March 2022.

VGr ZH, 10 November 2021, SB.2021.00067: Forfeiture of the claim to reassessment of withholding tax in the case ofresidence abroad (this decision is final): In the tax periods 2015 and 2016 of interest in this case, the obligor indisputably had his centre of life in country D, while he was active in the canton of Zurich as a member of the board of directors or managing director. He was thus always liable to withholding tax and was never subject to subsequent ordinary assessment, irrespective of whether the threshold of CHF 120,000 of gross income liable to withholding tax per calendar year was exceeded. Next, it is undisputed that he did not apply for the reassessment of the withholding tax within the forfeiture periods of § 144 para. 1 StG or Art. 137 para. 1 DBG (in the version in force until the end of 2020), i.e. by the end of March 2016 or the end of March 2017. His claim in this regard is thus forfeited, which is why the cantonal tax office rightly did not consider his request. Dismissal of the appeal of the liable party.
VGr ZH, 10 November 2021, SB.2021.00046: Allocation of loss carryforwards between the spinning-off company and the sp un-off company (this decision is final): The Administrative Court concluded that, in light of unanimous doctrine and case law, it must be assumed that loss carryforwards incurred in the spinning-off company have been transferred to the obligated party (spun-off company). With regard to the quantitative assessment of the previous year's losses that could be offset by the obligated party, the lower court wrongly made a discretionary assessment because not all reasonable and appropriate means of investigation had been exhausted and, in particular, no documents had been requested from the spinning-off company. In this respect, the cantonal tax office and subsequently also the lower court violated their duties to investigate. Partial approval of the (combined) appeals and referral back to the Tax Appeals Court for further investigation and a new decision.
VGr ZH, 15 December 2021, SB.2021.00102: Simulated loan (this decision is final): Unlike before the Tax Appeals Court, the obligor acknowledged before the Administrative Court that the loan granted to him by his D AG was simulated. The Administrative Court did not support his argumentation, which was first presented before the Administrative Court, that there had never been a will to repay, which is why the offsets should have been made in the years 2005-2008. With the declaration of the loan debt and the deduction of the interest, the obligor had expressed that the loan debt still existed and that a repayment intention could be assumed. The new legal position taken by the debtor, according to which the taxation of the investment income would be (partially) excluded due to the statute of limitations, was contradictory. Dismissal of the complaints of the debtor.
VGr ZH, 22 December 2021, SB.2021.00089: Tax deductibility of maintenance payments to the daughter living in Thailand (appeal pending before the Federal Supreme Court): Only the maintenance contributions directly owed under family law and actually made to cover the child's current living requirements are tax deductible, whereas contributions made voluntarily over and above this do not qualify for deduction. The Administrative Court came to the conclusion that the extent of the obligation to pay maintenance under family law had not been proven to date and had not resulted from the payments actually made or from the specific living costs of the daughter, which is why the maintenance contributions estimated by the lower court on a discretionary basis do not appear to be obviously arbitrary due to the lower cost of living at the child's place of residence in Thailand. Dismissal of the complaints of the obligor.
VGr ZH, 15 December 2021, SR.2021.00015: Back-tax proceedings due to a significantly under-declared imputed rental value and capital tax value for a foreign property (this decision is final): The capital tax value and imputed rental value of a foreign property are not subject to taxation in the Canton of Zurich. However, they are part of the rate-determining assets or the rate-determining income and thus have an effect on the allocation of debts and debt interest, which is why a correct declaration in the tax return is required. The mere declaration of a value without further information such as a calculation does not constitute a valuation within the meaning of section 160(2) of the Tax Act that the tax office can recognise, which is why the obligated parties cannot invoke section 160(2) of the Tax Act. The assessment of the property tax value in the post-tax procedure at 70% of the sales proceeds represents unequal treatment of the obligated parties compared to other property owners who are only required to pay tax on the cadastral value or the purchase price. Partial approval of the appeal and referral of the case back to the lower court for further investigation and a new decision.
VGr ZH, 12 January 2022, SB.2021.00064: Place of actual administration / overdepreciation (this decision is final): The liable party had moved its registered office to Canton X at the end of 2015. It was disputed before the Administrative Court whether the actual administration in the disputed tax periods 2015 and 2016 continued to be located in the Canton of Zurich or at the place of the registered office. Furthermore, the liable party contested certain depreciation and other expenses charged by the cantonal tax office. The Administrative Court considered it highly probable that the actual administration of the liable party had been located in the Canton of Zurich during the tax periods in dispute. On the one hand, this was shown by the fact that even today, the complainant's homepage only gave a postal address and a landline number in the Canton of Zurich. The fact that she had only recently informed her bank of her new address should also be taken into account. The obligor did not succeed in providing evidence to the contrary or in invalidating the main evidence. The obligor then failed to prove the additional need for depreciation to justify the over-depreciation. Dismissal of the obligor's appeal.
VGr ZH, 22 December 2021, SR.2021.00021: Tax freezing (this decision is not yet final): With a freezing order, the tax office of municipality B requested the obligor to freeze the amount x to cover the loss certificate for the 2010 state and municipal taxes as well as various other tax claims. The Administrative Court held that when reviewing a freezing order, it was limited to a prima facie assessment of the actual circumstances. This provisional and preliminary examination related to the existence and extent of the tax debt as well as to the existence of a risk. It affirmed the tax claim necessary for the guarantee as well as the tax jeopardy (cf. § 181 StG) with the existence of the loss certificate for the 2010 tax period. Since the obligor already fulfilled an element of jeopardy through the existence of a loss certificate, it was no longer relevant whether she moved out of Switzerland or remained here. Dismissal of the obligor's appeal.