Overview of the tax law decisions of the Zurich Administrative Court published in March 2021.
- VGr ZH, 16 December 2020, SB.2020.00099: Tax sovereignty (appeal pending before the Federal Supreme Court): The complainant was self-employed in the Canton of Zurich for decades. Today, he is an employee of an AG domiciled in the Canton of Zurich. After initially living in the canton of Zurich with his long-term partner, he moved to the canton of J. The complainant's partner lived in the canton of Zurich for several years. The life partner continued to live in the joint apartment and the complainant also stayed there regularly and paid for her rent in full. Since the complainant was able to continue to use the existing apartment of his partner as he wished, since the rental contract was in his name and since he was strongly anchored in the canton of Zurich in terms of his profession, the Administrative Court came to the conclusion that the continuation of the residence in the canton of Zurich appeared to be very probable. It would therefore have been up to the complainant to provide counter-evidence for the residence in Canton J. However, he had not succeeded in doing so. However, he had not succeeded in doing so. Dismissal of the complaint of the obligor.
- VGr ZH, 2 December 2020, SB.2020.00087: Qualification as a value-enhancing expense for real estate gains tax (this decision is final): The qualification of the contractually agreed work price, which was provided by a related company, as a value-enhancing expense within the meaning of § 221 StG is in dispute. The Administrative Court concluded that the contested decision of the Tax Appeal Court, which did not - even implicitly - address the relevant arguments of the obligated parties, violated Art. 29 para. 2 of the Federal Constitution. A remedy for the violation of the right to be heard was out of the question. Partial approval of the complaint of the obligated party and referral back to the Tax Appeals Court for further investigation and a new decision.
- VGr ZH, 30 September 2020, SB.2019.00046: Real property gains tax; tax deferral, determination of land value 20 years ago, transfer of procedural costs (this decision is final): The Administrative Court considered that the question of whether a deferral of gains could be granted was based on the absolute method. Since the investment costs of the sold property would by far exceed the purchase price of the replacement property, no tax deferral had rightly been granted. In addition to the tax deferral, the transfer of the pre-instance procedural costs and, in particular, the appraisal costs was also disputed. The Administrative Court confirmed that the costs should be charged in full to the unsuccessful party, since in the present case there was no justification for transferring the costs in a manner that deviated from the principle of the lower taxpayer. Dismissal of the complaint of the liable party.
- VGr ZH, 2 December 2020, SR.2020.00019: Securing direct federal tax in the case of disputed tax jurisdiction (this decision is final): The complainant has its statutory seat in Canton X and was assessed there in a legally binding manner. The Cantonal Tax Office of Zurich assumed that the complainant was liable to tax in the Canton of Zurich in the tax periods 2015-2018, as there was circumstantial evidence that the actual management of the company had been carried out in the Canton of Zurich or at the domicile of the board of directors. The Administrative Court considered that it overlooked the fact that the direct federal tax now secured by the Canton of Zurich had already been paid in the Canton of X. The Administrative Court also considered the fact that the direct federal tax had been paid in the Canton of Zurich. A tax threat could therefore at most still exist to the extent of 17%, the share to which the cantons are entitled in the direct federal tax. However, the amounts paid in had already been completely withdrawn from the complainant's access, which was why no tax threat was apparent for this reason alone. The appeal of the obligated party is upheld insofar as it can be accepted, and the freezing order is lifted.
- VGr ZH, 2 December 2020, SR.2020.00026: Justification requirements for freezing orders (this decision is final): The Administrative Court considered that it is in the nature of tax freezing that it is ordered with a certain temporal urgency, which is why the requirements for justification should not be too high. At the very least, however, the tax amounts to be frozen and the specific reason for the freezing must be evident from the freezing order, whereby it suffices to describe the alleged tax threat in a few sentences. If the freezing order is challenged before the administrative court, a more detailed statement of reasons must then be provided in the response to the appeal. The present statement repeating the legal text "The freezing order is issued due to a threat to the tax claim" was not sufficient as a statement of reasons. It was also not clear from the response to the appeal on what grounds the seizure was made. Due to the violation of the duty to state reasons, the Administrative Court annulled the freezing order. It did not intervene in relation to the complaints concerning the attachment proceedings. The appeal of the obligated party was upheld insofar as it could be upheld, and the freezing order was lifted.
- VGr ZH, 30 July 2020, SB.2020.00025: Representation costs/private share of vehicles in the case of a luxury vehicle (this decision is final): The amount of the private share in the case of a luxury car was disputed. According to the case law and doctrine of the Federal Supreme Court, the costs of representation for an appearance in keeping with one's status generally lack the necessary connection to the purpose of the company, even if they may be conducive to the purpose of the company. For this reason, a luxury or private share should regularly be excluded, particularly in the case of luxurious business vehicles, even if they are also used to cultivate the image of the company vis-à-vis its customers. Dismissal of the complaint of the obligated party.
- VGr ZH, 16 December 2020, SB.2020.00020: After-tax proceedings due to profit shifting between sister companies (appeal pending at the Federal Supreme Court): The obligated party domiciled in Canton Zurich and its sister company domiciled in Canton X are held by the same two natural persons. In the course of a VAT audit, the obligor was subsequently charged for unrecorded turnover. The subsequent audit of the accounts of the obligated party revealed various pecuniary benefits paid by the obligated party. The Administrative Court affirmed the existence of a new fact, as there were no indications from the obligated party's annual financial statements that the accounting contained errors. Against the offsets made by the cantonal tax office for monetary benefits, the obligor argued that its sister company had provided it with personnel benefits. The Administrative Court considered this to be insufficiently proven in law and upheld the offsetting of the pecuniary benefits. Dismissal of the appeal and complaint of the obligor.
All decisions of the Administrative Court of Zurich are available here.
