Overview of the tax law decisions of the Zurich Administrative Court published in May 2021.
- VGr ZH, 10 March 2021, SB.2020.00119: Tax sovereignty (appeal pending before theFederal Supreme Court): The lower tax appeal court came to the conclusion that the centre of life of the taxpaying couple was outside the Canton of Zurich in the 2017 tax period and upheld the taxpayers' appeal. In the opinion of the Administrative Court, however, both the family and economic interests of the taxpayers were located in the Canton of Zurich in the tax period at issue, which is why the Cantonal Tax Office was right to assume that the taxpayers were resident in the Canton of Zurich for tax purposes and had taxed them. Appeal of the cantonal tax office upheld.
- VGr ZH, 4 March 2021, SB.2020.00025: Reasons for recusal/ breach of official duty / proof of tax-reducing facts (this decision is not yet legally binding):
The reasons for recusal raised by the taxpayer are obviously inadmissible, not sufficiently substantiated, too general and, moreover, raised too late, which is why the Administrative Court did not consider this application. It also did not consider the complaint of improper performance of duties, as this is the responsibility of the Finance Directorate and then of the Government Council. Furthermore, the Administrative Court confirmed the offsetting of medical expenses and donations, as the corresponding receipts were missing or had only been submitted in black. Dismissal of the taxpayer's appeal insofar as it was upheld. - VGr ZH, 24 February 2021, SB.2020.00102: Qualification of an inflow made under the title "Share Purchase Interest Rate" as taxable income or tax-exempt capital gain (this decision is final): The taxpayers held all the shares of an AG domiciled in the Canton of Zurich. By share purchase agreement dated 19 April 2016, they sold all shares to another company. In addition to the actual purchase price (share purchase price), the latter paid the taxpayers an amount known as the "share purchase interest rate". The (complainant) cantonal tax office claimed that the corresponding inflow was taxable income. According to the share purchase agreement and the "no leakage" clause agreed therein, the obligated parties had waived the property rights inherent in their participations from 1 January 2016 to 19 April 2016. They were compensated for this by means of a share purchase interest rate. The obligated parties, on the other hand, took the view that there was a tax-free capital gain. The share purchase interest rate had taken into account the capital gain between the locked box date (31 December 2015) and the closing date (19 April 2016). The Administrative Court held that the "no leakage" clause did not qualify as a guarantee but as an assurance within the meaning of Art. 197 para. 1 CO. Thus, it constituted a consideration for the object of purchase or for certain characteristics thereof and, together with the agreement on the share purchase interest rate, did not constitute an independent, bilateral contract. Consequently, the share purchase agreement could not be qualified as a mixed legal transaction which, with the share purchase interest rate, contained parts unrelated to the sale that would be subject to income tax. Dismissal of the appeal of the cantonal tax office.
- VGr ZH, 9 February 2021, SB.2021.00002: Valuation of condominium property for the purpose of property taxation (this decision is final): The taxpaying couple owns several properties in the Canton of Zurich, including nine condominium units each on the upper floors of two properties. They argued that their condominium units should be valued for tax purposes as multi-family houses, since they were comparable to a multi-family house on the basis of various objective characteristics. The Administrative Court held that condominium units were to be valued according to the 2009 Directive based on the net asset value. An economic approach in the sense that the condominium units were to be equated with an apartment building and their property tax value was to be assessed on the basis of the income value was out of the question. Dismissal of the taxpayer's appeal insofar as it was upheld.
All decisions of the Administrative Court of Zurich are available here.
