Overview of the tax law decisions of the Zurich Administrative Court published in January 2021.
- VGr ZH, 11 November 2020, SB.2020.00077: No tax exemption for the youth section of the gymnastics club (this decision is not yet final); The complainant is a men's gymnastics club which requested partial tax exemption for the youth section it offers. The Administrative Court came to the conclusion that the youth club cannot be denied a certain public purpose, but that it does not fulfil a state task in the narrower sense, which is why a tax exemption based on the pursuit of public purposes is ruled out. The Youth Council is also not to be exempted from taxes on the basis of the pursuit of public-benefit purposes. Rather, it pursues non-material purposes in that it conveys the joy of sport to the participating children. Dismissal of the taxpayer's appeal.
- VGr ZH, 11 November 2020, GB.2020.00003: Entitlement to party compensation in the discontinued fine proceedings (this decision is not yet final); The complainant applied for party compensation for the evasion proceedings that were suspended until the conclusion of the after-tax proceedings and also discontinued as a result of their discontinuation. The Administrative Court came to the conclusion that the complainant could not be compensated (again) for the expenses she had incurred for the legal representation in the post-tax proceedings until the Federal Supreme Court. It also did not award her any compensation for her representation in the tax evasion proceedings, since it was not evident to what extent she had incurred expenses for legal representation in the (discontinued) tax evasion proceedings or had suffered economic losses. Dismissal of the (combined) appeals of the taxpayers.
- VGr ZH, 30 September 2020, SB.2020.00075: Denial of a transposition / affirmation of a tax avoidance (this decision is final); The complainant had a debt to his ex-wife from a matrimonial property dispute. Since he was unable to settle the claim with liquid assets, the ex-wife was allocated 50% of the shares in the complainant's company, which were part of the acquisition. At the same time, the ex-wife undertook to offer the shares for sale to a company controlled by the complainant. This right of purchase was exercised by the complainant's holding company. The Administrative Court came to the conclusion that, although the procedure did not meet the transposition requirement, it had to be assessed as tax avoidance. Dismissal of the (combined) appeals of the taxpayer.
- VGr ZH, 16 September 2020, SB.2020.00039: Consideration of default interest for income tax purposes instead of real estate gains tax purposes (this decision is final); The complainant paid the sales price for a property only about 1.5 years after the agreed date. The Administrative Court concluded that the default interest paid due to the delay did not constitute a consideration for the acquisition but a compensation for the delay and as such was deductible for income tax purposes but not for real estate gains tax purposes. Dismissal of the taxpayer's appeal.
- VGr ZH, 10 September 2020, SB.2020.00046: Deduction for underutilisation on the imputed rental value of a partially owner-occupied property (this decision is final); The complainants are owners of a property in which they use two apartments on the upper floor and attic as private living space and rent out the remaining premises to businesses. The Administrative Court granted the complainants an underutilisation deduction for two rooms due to the move-out of two of the three daughters, but denied a deduction in the imputed rental value for the tenancy with E GmbH, which is controlled by the complainants. It also denied a deduction for the property management costs incurred by E GmbH, as the agreement in this regard was submitted too late by the complainants and must therefore be rejected as an inadmissible novelty. Dismissal of the taxpayers' appeal.
- VGr ZH, 15 July 2020, SB.2020.00036: Burden of proof in the case of loan debt claimed as tax-reducing (this decision is final); In the decedent's tax returns for 2017 and 2018 (up to the date of death), two passive loans were declared as debts - as in previous years. The cantonal tax office did not allow these to be deducted. The Administrative Court came to the conclusion that the burden of proof regarding the (continued) existence of the tax-reducing loans lies with the taxpayer or his legal successor, since the existence of one loan is not proven due to the lack of a written loan agreement and an apparent lender, and regarding the second loan, due to the lack of interest payments and the agreed term, at least the continued existence of the loan appears doubtful. Dismissal of the heirs' appeal.
All decisions of the Administrative Court of Zurich are available here.
