Overview of the tax law decisions of the Administrative Court of Zurich and the decisions of the Tax Appeal Court of Zurich, published in January and early February 2020.
Decisions of the Zurich Administrative Court (available at: Link):
- VGr ZH, 13 November 2019, SR.2019.00010: Tax guarantee (this decision is not yet legally binding): With a guarantee order, the municipal tax office requested the obligated party to guarantee the state and municipal taxes for 2010-2012, as there was a tax risk due to his lack of residence in Switzerland. The obligated person claimed that he had only temporarily stayed abroad for medical treatment, which did not constitute a tax risk. The Administrative Court considered that the obligated party had not sufficiently substantiated his civil law domicile in Switzerland and affirmed the tax risk in the sense of a prima facie assessment. The existence and amount of the tax debt had not been disputed in a substantiated manner and had not been documented in the files. Rejection of the appeal.
- VGr ZH, 13 November 2019, SR.2019.00011: Tax security (this decision is not yet legally binding): The municipal tax office requested Compulsory A to secure a certain amount to cover the state and municipal taxes of several years, which are shown on loss certificates. The reason given for securing the property was a tax hazard due to a notified auction of a property belonging to obligor A. The Administrative Court considered the existence and amount of the tax claims to be secured to be sufficient, the payment of which is prima facie jeopardised due to the available loss certificates (and possibly also due to the upcoming auction) and thus the freezing order to be lawful. Rejection of the appeal.
- VGr ZH, 2 December 2019, SB.2019.00098: Discretionary assessment due to failure to submit a tax return despite public request (this decision is not yet final): The obligated person resident abroad has a limited tax liability in Switzerland and was assessed according to the dutiful discretion after failing to submit a tax return despite public request. Since he did not provide a Swiss address for service despite several requests, the corresponding discretionary assessments were sent to him by publication in the Official Gazette. The Administrative Court considered that the obligated party had deliberately accepted service by means of official publication by steadfastly refusing to indicate a Swiss address for service despite repeated requests. Service by means of an official publication does not therefore constitute an infringement of the right to be heard. Furthermore, it did not consider the (substantiation) requirements for contesting a discretionary tax assessment to be fulfilled, which is why the cantonal tax office should not have acted on the objections of the obligor at all. Dismissal of the appeal
- VGr ZH, 4 December 2019, SR.2019.00006: Post-tax proceedings on account of undeclared land parcel (this decision is not yet legally binding): The obligated person inherited from her mother, among other things, 50% of an apartment building and 50% of a neighbouring land parcel. The share of the apartment building was always declared in the tax return of the obligated persons and their husbands, but the share of the undeveloped land parcel was not (separately) declared. The Administrative Court affirmed both the new fact and the undertaxation caused by an incomplete declaration. In the absence of a complete and precise declaration, it is also not a mere valuation question which would exclude the possibility of an after-tax levy pursuant to § 160, Subsection 2, StG. Dismissal of the appeal.
Decisions of the Tax Appeal Court of Zurich (available under: Link):
- StRG ZH, 11 October 2019, DB.2019.101/ST.2019.131: Child deduction for cohabiting partners with joint parental custody (this decision is final): Spouses A and B declared assets of CHF 312,000 in their 2015 tax return, whereas these had amounted to CHF 180,000 in the previous year. The tax commissioner's request for justification of the increase in assets (tax-exempt income, support payments from third parties, etc.) went 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 improperly mixed the direct and indirect methods in the discretionary assessment and that the assessment/estimation was therefore flawed. It reduced the discretionary income estimate from CHF 35,000 to CHF 20,600. Appeal partially upheld.
- StRG ZH, 4 November 2019, VS.2018.18: Refund of withholding tax in case of negligent non-declaration (this decision is final): In the 2014 tax return, the obligated parties A and B declared an asset tax value of Fr. 680,000 and an income of Fr. 0 for their shares in D AG. In the assessment decision, the cantonal tax office increased the dividend income to Fr. 245,000 and at the same time denied the claim for refund of the withholding tax paid on it. Applying the version of Art. 23 para. 1 and 2 and Art. 70d VStG in force since 1 January 2019, the Tax Appeal Court concluded that the obligated parties had negligently failed to declare the dividend. Contingent intent could be ruled out because A, as representative of the corporation controlled by him, had signed Form 103 in his own hand and submitted it to the FTA. Furthermore, the withholding tax amount transferred by the company to the FTA clearly exceeded any tax reduction caused by the misdeclaration. Appeal upheld.
- StRG ZH, December 2, 2019, DB.2019.70, ST.2019.93: Discretionary assessment due to failure to file a tax return for the year of incorporation (this decision is legally binding): The A GmbH, founded in June 2017, did not file a tax return for the first fiscal year under review despite a reminder, which is why it was subsequently assessed according to dutiful discretion. In the proceedings before the Tax Appeal Court, it requested that the discretionary assessment made be revised and enclosed the signed tax return for 2017 with a reference to a first fiscal year that is longer than one year. The Tax Appeal Court came to the conclusion that there was no obligation to file a tax return in the year of foundation in the event of the overlong fiscal year being used and that, in the absence of specific statutory regulations, the A GmbH was allowed to raise the objection of the overlong first fiscal year as a novelty in the appeal and appeal proceedings. Approval of the complaints (with corresponding removal of the discretionary assessment).
