Overview of the tax law decisions of the Administrative Court of Zurich and the decisions of the Tax Appeal Court of Zurich, published in February and early March 2020.
Decisions of the Zurich Administrative Court (available at: Link):
- VGr ZH, 8 January 2020, SR.2019.00109: Tax liability (spousal liability/cancellation of joint and several liability/right to file applications) - appeal pending before the Federal Supreme Court. In the present proceedings, the taxpayer claims his inability to pay, while his ex-wife is undisputedly wealthy. The joint and several liability of the spouses does not apply if the marriage is separated or if one of the spouses is insolvent, whereby proof of insolvency as a tax-reducing fact must be provided by the applicant and, as a rule, only the solvent spouse is entitled to file an application. The solvent spouse has neither actively participated in the proceedings in this case nor has she herself requested the cancellation of joint and several liability. Due to the contradictory statements of the obligor and the legal nature of the asserted debts, the Administrative Court considered his inability to pay to be insufficiently proven, thus eliminating the possibility of lifting joint and several liability. Approval of the appeal by the Municipal Tax Office and continuation of joint and several liability.
- VGr ZH, 18 December 2019, SB.2019.00080: Application for remission of additional taxes and fines - this decision is legally binding The taxable couple applied for remission of outstanding back taxes and fines regarding state and municipal taxes 2006 to 2014 (back taxes) and 2007 to 2015 (fines). The Tax Appeal Court had to examine the application for remission to a lesser extent than the cantonal tax office. The subject matter of the dispute cannot be extended again before the Administrative Court, which is why the Administrative Court did not consider the appeal to this extent. Moreover, the Administrative Court considered that the reasons put forward by the obligated persons (including the early retirement of the obligated person, loss of income from caretaker work) were not such as to make the contested order appear to be legally incorrect. Dismissal of the appeal in so far as it is upheld.
- VGr ZH, 18 December 2019, SB.2018.00094: Transfer price correction of a private equity structure - this decision is legally binding. The obligatory entity is a public limited company with - at least during the period in dispute - its registered office in the Canton of Zurich and is held 50 % each by two natural persons. During the tax periods in dispute, it provided almost exclusively advisory services to its quasi non-affiliated company, which is held by the same natural persons through a holding company, is domiciled on a Channel Island and is the general partner of an investment fund also established under the law of this Channel Island. After an audit, the cantonal tax office concluded that the obligated party performed all value-adding functions, while its quasi-non-entity only performed routine functions. The offsets made by the cantonal tax office were confirmed by the Tax Appeal Court. The Administrative Court also concluded that all non-routine functions were performed in Switzerland during the years in dispute and that therefore no risks could be allocated to the quasi-non-entity on the Channel Island. Dismissal of the complaints.
- VGr ZH, December 4, 2019, SB.2019.00102: Official misinformation regarding real estate profit tax - this decision is legally binding: It is disputed whether the taxpayer represented by a lawyer can rely on the delivery date of an initially unsigned objection decision on an official misinformation of the real estate tax committee, which confirmed that the delivery of the signed objection decision is decisive for a possible appeal period, or whether he should have recognized the incorrectness of the decision. The Administrative Court came to the conclusion that the obligated party represented by a lawyer should have been aware that objection decisions can be validly served even without a signature, and that even the inadvertent non-signature of a decision does not normally make it appear null and void. Dismissal of the appeal.
Decisions of the Tax Appeal Court of Zurich (available under: Link):
- StRG ZH, 14 February 2020, ST.2019.121: Property tax value of real estate - this decision is not yet legally binding. The recurrent and his partner each own 50% of a floor unit, which they sold in October 2018. In application of the "Directive 2009 on the valuation of properties and the determination of imputed rental values", the cantonal tax office has increased the property tax value for the 2017 tax period to 70% of the proportional sales proceeds. The Tax Appeal Court came to the conclusion that the sales proceeds from the sale in October 2018 were suitable as a fair market value at the end of 2017. However, the principle of equal treatment could not justify a reference to this value in the present case, as the 2009 valuation would still be applied to all other property owners who had not sold their property, even though the formula values were too low due to the price increase in violation of federal law. Approval of the appeal.
