Overview of the tax law decisions of the Administrative Court of Zurich and the decisions of the Tax Appeal Court of Zurich, published in December 2019.
Decisions of the Zurich Administrative Court (available at: Link):
- VGr ZH, November 13, 2019, SB.2019.00069: Tax qualification of an online trading game with so-called nuggets (this decision is not yet legally binding): The obligated person generated high income from the sale of so-called nuggets on an online gaming platform. While the cantonal tax office offset this income as taxable, the tax appeal court qualified this income as tax-free capital gains resulting from private asset management. The cantonal tax office lodged an appeal with the administrative court. The Administrative Court considered it decisive for the taxability of the nuggets whether they can be qualified for tax purposes as a) digital means of payment, b) asset or c) stake. It came to the conclusion that, inter alia, due to the limited tradability, the nuggets were not comparable with an actual asset or asset, nor with a digital currency or a redeemable (gaming) credit, but rather with gaming stakes. The net proceeds or winnings from the sale of the nuggets are therefore taxable income. Partial approval of the appeal by the cantonal tax office.
- VGr ZH, 23 October 2019, SB.2019.00032: Deductibility of early repayment fees in the event of a change of creditor (already confirmed by the Federal Supreme Court): Taxpayers claimed early repayment fees as debt interest for deduction, which were incurred due to an early change of mortgage bank. While the cantonal tax office denied the deductibility with reference to two recent Federal Court decisions, the Tax Appeal Court affirmed the deductibility. The Administrative Court did not consider the more recent practice of the Federal Supreme Court, according to which early repayment penalties only qualify for the deduction of debt interest if a loan relationship continues to exist and has been restructured only in terms of the conditions or if there is no change of creditor, to be merely obiter dicta. Since a change of creditors had taken place, the Administrative Court denied the deduction of interest on the debt in application of the Federal Supreme Court's case law and upheld the appeal of the cantonal tax office. The appeal lodged against the Administrative Court ruling was already dismissed by the Federal Supreme Court in its ruling of 16 December 2019 (2C_1009/2019) (see our article of 12 January 2020).
Decisions of the Tax Appeal Court of Zurich (available under: Link):
- StRG ZH, 12 August 2019, SB.2018.59, ST.2018.76: Discretionary assessment in case of unexplained development of assets (this decision is legally binding): In their 2015 tax return, spouses A and B declared assets of CHF 312,000, whereas in the previous year these assets amounted to CHF 180,000. The condition imposed by the tax commissioner, with which he requested a justification for the increase in assets (tax-free income, support payments from third parties, etc.) remained unanswered. In the assessment, the tax commissioner increased the taxable income by CHF 35,000 (estimate based on dutiful discretion). The Tax Appeal Court found that the tax office had mixed the direct and indirect methods in an inadmissible manner in its estimation, according to its dutiful discretion, which is why the assessment/estimation proved to be incorrect. It reduced the discretionary estimated income from CHF 35,000 to CHF 20,600 and partially upheld the appeal.
