Overview of the tax law decisions of the Administrative Court of Zurich and the decisions of the Tax Appeal Court of Zurich published in May and June 2020.
Decisions of the Zurich Administrative Court (available at: Link):
- VGr ZH, 19 February 2020, SB.2019.91: Discretionary tax assessment (appeal pending before the Federal Supreme Court): In their tax returns, the obligated persons declared taxable income of CHF 0 and over-indebtedness of more than CHF 2 million. Neither in the proceedings before the tax office nor in the proceedings before the lower court were the obligated parties able to present and prove the actual facts of the case. How they made their living remains a mystery in view of their asset development. The Administrative Court came to the conclusion that the discretionary tax assessment was not objectionable. Rejection.
- VVGr ZH, 19 February 2020, SB.2019.00063: Fictitious delivery in the case of a postal retention order (appeal pending before the Federal Supreme Court): The question of whether the deadline for appeal has been observed depends on whether or when the decision of the lower court was deemed to have been delivered. The decision of the Tax Appeal Court sent with a court document to the old address of the representative of the obligor was forwarded to the post office at the new place of residence on the basis of a forwarding order. Upon receipt by this post office, the court document was immediately returned to the sender on the basis of a postal retention order issued by the representative of the obligor during his holiday absence, without a collection invitation having been deposited. The representative of the obligated party only became aware of the decision two months later. Swiss Post's procedure is in line with its more recent practice regarding postal retention orders in connection with court documents. According to the case law of the Federal Supreme Court, the fiction of delivery also applies in this case, since the instruction to Swiss Post to retain the postal item implicitly waives the delivery of any postal item. In order to refute the fictitious delivery, the representative of the obligated party cannot plead that no pick-up invitation has been deposited because he bears the risk for special arrangements with the postal service. The time limit for appeal has not been observed. Non-occurrence.
- VGr ZH, 29 January 2020, SB.2019.00096/97: Offsetting of a provision for future rent after the decision to discontinue business activities (this decision is legally binding): The obligated party is a public limited company providing consulting services in the financial sector. Due to the loss of its main mandate, it decided in 2017 to discontinue its business activities as of mid-2018. It claimed a provision for the rent owed until the regular end of the lease agreement. In the previous year, it also booked a provision for costs in connection with the restoration of the office premises. The subject of the dispute was whether these provisions were justified on business grounds. In order for a provision to be justified in business terms, the corresponding expense must be economically attributable to the past financial year under the specific circumstances. As the lower court rightly considered, charging the 2017 financial year with the rent for the period July 2018 to February 2020 violates the principle of periodicity. The lower court rightly denied the provision for future rent. However, the appeal was upheld with regard to the provision made in the previous year for costs in connection with the restoration of the office premises.
- VGr ZH, 29 January 2020, SB.2019.00079: Calculation of the real estate gain; congruence principle; 2nd course of law (this decision is final): If the Tax Appeal Court does not adhere to the considerations in the rejection decision, it violates its procedural obligations and commits a formal denial of justice, which automatically leads to the annulment of the decision. The contested decision does not take full account of the considerations in the rejection decision. In the second instance, the Tax Appeal Court found that the basic charge, which the obligated parties had established approximately three years prior to the sale of the property in dispute, had not been included in the sale price. The Administrative Court came to the conclusion that, contrary to what was stated in the contested decision, there was no room for deduction in the investment costs. In particular, it did not do so on the grounds that the base load had wrongly not been taken into account when determining the sales price, which is why the principle of congruence requires that the reduced value caused by the base load be deducted from the investment costs. Approval.
- VGr ZH, 18 December 2019, SB.2019.00073: Withholding tax liability (this decision is final and absolute): The complaining Swiss AG used an employee of its German parent company on one of its projects in Switzerland. Thereupon, the cantonal tax office obliged her, as the de facto employer, to levy, account for and deliver the withholding tax for this employee. The complainant submitted that it was not true that she had become a de facto employer; rather, the cooperation with her German parent company had taken place in the form of a subcontracting relationship. The Administrative Court considered that an overall assessment of the constellation that was actually lived out led to the conclusion in the present case that the complainant had become a de facto employer and was thus rightly included in the law as a debtor of withholding tax. Rejection...
Decisions of the Tax Appeal Court of Zurich (available under: Link):
- StRG ZH, 23 March 2020, DB.2017.107/ST.2017.135: Simplified accounting procedure (this decision is legally binding): The provisions concerning the simplified accounting procedure were introduced on the basis of Art. 2 of the Federal Act on Measures to Combat Illegal Employment (BGSA) and are applicable to small salaries from employment. The obligated person works full-time as managing director at C AG and also holds a 50% stake in each of the three companies D, E and F. He settled the amounts received from these three companies in a simplified settlement procedure. The cantonal tax office, on the other hand, offset these amounts in its regular declaration, as the simplified settlement procedure is not permitted for these amounts. The Tax Appeal Court concluded that there was no indication that the amounts paid by D, E and F were paid as compensation for work actually performed, which is why they would not qualify as "small remuneration from employment" within the meaning of Art. 37a DBG or 37a StG and the simplified settlement procedure is therefore not permitted. The amounts are taxable as investment income by the obligor. Rejection of complaint and appeal.
