Overview of the tax law decisions of the Zurich Administrative Court published in September/October 2020.
- VGr ZH, 22 July 2020, SB.2019.00099: Commercial property trading (this decision is legally binding); affirmation of commercial property trading for an independent metal worker who, together with a bricklayer, bought a property in 2004 as part of a simple partnership, renovated it and then rented it out. The merger of the two tradesmen into a simple company, in the course of which the property in dispute was acquired and renovated, suggests that the tradesman was self-employed, which is why the property constituted business assets from the outset. The high level of external financing at the time of acquisition also speaks in favour of commercial activity. The fact that the property was held for twelve years and the fact that this sale was the first property sale by the obligated party speak against commercial activity, but are not able to overturn it. Rejection of the taxpayer's complaint.
- VGr ZH, 1 July 2020, SB.2020.00016: Invalidity of the objection decision due to lack of inclusion of the legal successors of the deceased co-seller (this decision is legally binding); In the case of real estate gains tax, all co- or joint owners selling the property and their legal successors form a necessary joint litigation association and must be included in the assessment decision, otherwise the tax assessment is null and void. After the death of one of the selling parties, neither its former representation nor the objection authority could trust that the heirs of the deceased party would be legally represented post mortem by the former representation. Since the heirs were thus already not validly represented in the objection proceedings, the objection decision suffers from a lack of opening and is null and void, which is why the objection proceedings must be repeated with the involvement of the heirs or the possible appointment of a representative of the heirs. Partial acceptance of the taxpayer's appeal and rejection of the case for a new decision in the appeal proceedings.
- VGr ZH, 26 August 2020, SB.2020.00024: Wealth tax assessment: the application of the practical method to a small law firm organised as a joint-stock company is controversial (this decision is not yet legally binding); KS No. 28 is a schematised solution which allows for efficient administration, but at the same time is subject to a certain degree of uncertainty. It is only possible to deviate from KS No. 28 if a better understanding of the concept of market value so requires or if this is necessary in view of the particularities of the individual case. In the present case, it is not comprehensible that the application of the valuation method advocated by the obligated parties (net asset value) should lead to a better understanding of the market value of the stock corporation than the method pursuant to KS No. 28. Thus, there are no prerequisites for deviating from KS No. 28 and the relevant case law. Rather, a deviation from STS No. 28 would lead to a preference of the obligated parties which would not be compatible with the principle of equality of laws. Rejection of the complaint of the obligated persons.
- VGr ZH, 29 April 2020, SB.2019.00118: Business justification for a value adjustment on an investment (appeal pending before the Federal Supreme Court); The obligor, domiciled in the Canton of Zurich, had been providing capital to its related company Y, domiciled abroad, for years. The outstanding amount grew steadily over the years. At the end of 2013, it participated in a capital increase of Y and paid off the outstanding debt by means of conversion. The value adjustment of CHF 500,000 booked in 2014 on the participation in Y should not be allowed as a deduction, as the debt ratio was not in line with the third party price, the value adjustment is contrary to the principle of accrual and the participation was overvalued. Dismissal of the complaints of the obligors.
All decisions of the Administrative Court of Zurich are available here.
