Overview of the tax law decisions of the Zurich Administrative Court published in June and July 2021.
- VGr ZH, 21 April 2021, SB.2021.00011: Request for recusal against tax appeal judge (this decision is final): According to Federal Supreme Court case law, grounds for recusal must generally be asserted within approximately one week. The present submission of a request for recusal after five weeks no longer constitutes an immediate assertion of the ground for recusal within the meaning of the case law, which is why the claim is forfeited in accordance with the principle of good faith. Dismissal of the taxpayer's appeal.
- VGr ZH, 10 March 2021, SB.2020.00116: Real estate gains tax - transfer of real estate of an employee benefit institution to an investment foundation; tax deferral due to restructuring (appeal pending before the Federal Supreme Court): The taxpayer - an employee benefit foundation - transferred all real estate owned by it to an investment foundation by means of an asset transfer agreement. It is disputed whether this transfer constitutes a restructuring within the meaning of § 216 para. 3 lit. d in conjunction with § 67 para. 1 StG, so that the real estate gains tax is to be deferred, or whether a tax deferral can be granted on the basis of Art. 80 para. 4 BVG. The Administrative Court came to the conclusion that in view of the importance of asset management for employee benefit institutions, the principles of pension law to be observed in this regard and the circumstances specific to the individual case, it was possible to speak of a reorganisation of asset management in the sense of a tax restructuring. The transaction, which under civil law was structured as a transfer of assets within the meaning of Art. 98 of the Merger Act, was economically equivalent to a spin-off, which could be subsumed under the division within the meaning of Art. 80 para. 4 sentence 2 of the BVG. Dismissal of the appeal of the municipal tax office.
- VGr ZH, 31 March 2021, SR.2020.00030: Disputed scope of tax liability in after-tax proceedings (this decision is final): The taxpayer obtained a settlement permit in 2002 due to his professorship and acquired a condominium in the Canton of Zurich in 2006. His wife lived in Spain with their children. Based on a voluntary declaration by the taxpayer, the cantonal tax office opened subsequent tax proceedings for the years 2007-2013. The taxpayer argued before the Administrative Court that he had only been subject to limited tax liability in Switzerland in the tax periods 2007 to 2011, which is why the subsequent tax calculations should be adjusted accordingly. The Administrative Court held that the purpose of the subsequent tax proceedings was not to completely reassess the previous assessment. In the present case, the taxpayer's residence for tax purposes could not be re-examined. An appeal was also excluded, as the taxpayer would have had to assert the alleged centre of life abroad in the ordinary proceedings. Dismissal of the taxpayer's appeal.
- VGr ZH, 5 May 2021, SB.2021.00010: Independent real estate trading in relation to a site development (this decision is final): The taxpayer and her sister each hold half of the shares in a joint-stock company, which originally came from their father's estate. In 2000, the limited company sold the taxpayer and her sister half-ownership each of the factory premises. The neighbouring property remained in the ownership of the AG. Between 2010 and 2012, the entire site was redeveloped. After completion of the construction project, the plc transferred certain condominium units to the obligor and her sister, which they sold on shortly afterwards. They also sold their co-ownership shares in the factory property. Among other things, because the sold properties were made the subject of an actual construction project (including a design plan) in which the obligor took a leading role, the Administrative Court qualified the sale as commercial. The sisters had not only wanted to dissolve the existing community of heirs, but also to make the greatest possible profit. Dismissal of the taxpayer's appeal.
- VGr ZH, 21 April 2021, SB.2020.00118: Tax refund to surviving spouse (appeal pending before the Federal Supreme Court): The dispute is whether the municipal tax office is entitled to pay half of the tax credit of the couple separated by death to the widow (who is no longer entitled to inherit) and half to the heirs of the deceased husband. The Administrative Court considered that the tax refund in the area of direct federal tax is primarily made according to the taxable elements (tax factors) and, in the case of a zero assessment, to the spouse who had actually paid the excess taxes. In the absence of harmonisation, however, the cantons were free to regulate the reimbursement of state and communal taxes differently, whereby in particular the half reimbursement to the spouses provided for in the Canton of Zurich was also permissible, provided that they had not reached a different agreement. This regulation was applicable by analogy to constellations in which the marital union had been dissolved by death and was accordingly also required in the present case. However, the half tax refund did not affect any civil law claims between the parties. Dismissal of the widow's appeal.
- VGr ZH, 5 May 2021, SB.2020.00101: Replacement acquisition of a permanently owner-occupied residential property (this decision is final): The taxpayer initially occupied a flat that she owned, which she sold with a view to acquiring a flat in a new development that was to be built in April 2017 by way of a publicly notarised purchase contract. Due to the delayed completion of the development, the taxpayer moved into a flat that she also owned as an "interim solution" for around ten months. In May 2018, ownership of the now completed flat was transferred to the taxpayer. In June 2018, she sold the flat occupied as an "interim solution". The municipal tax office refused the taxpayer tax deferral due to replacement acquisition on the grounds that the flat sold in June 2018 was not a permanently and exclusively owner-occupied residential property. The Administrative Court, on the other hand, affirmed the permanent owner-occupancy of the sold property. Since the decision to acquire a replacement was not based on the public notarisation of the purchase contract but on the entry in the land register, it also considered the causal connection between the sale of the second home and the acquisition of the new home to be given. Accordingly, it affirmed a partial tax deferral. Partial approval of the taxpayer's appeal.
- VGr ZH, 5 May 2021, SR.2020.00032: Violation of the right to be heard due to insufficient substantiation of the objection ruling in the after-tax proceedings (this ruling is final): The after-tax objection ruling issued by the cantonal tax office contained neither a presentation of the facts nor a tax law subsumption. It only referred to the after-tax bases and after-tax calculations, which, apart from a few brief explanatory comments, were limited to the arithmetical implementation of the offsets made. Based on the legally insufficient reasoning, the Administrative Court found a violation of the right to be heard, set aside the objection ruling of the Cantonal Tax Office and remanded the case to the Cantonal Tax Office for (possible) further investigation and a new decision. Partial approval of the complaint and the appeal of the taxpayer.
- VGr ZH, 23 March 2021, SR.2021.00023: Court and lawyer costs as property maintenance? (this decision is final): The Administrative Court considered the court and legal costs claimed by the taxpayer to be non-deductible, as they were not directly related to the maintenance of the value of the property. Dismissal of the taxpayer's appeal.
All decisions of the Administrative Court of Zurich are available here.
