The judgment of the Federal Court 2C_557/2017 of 7 August 2018 was based on the following (abridged) facts:
In 2008, A_AG sold its 28% stake in the Belgian company B_NV to its Belgian subsidiary A_NV at a book value (= tax value = cost of sales) of EUR 20.4 million. In 2009, it became apparent that such a transaction triggered a Belgian tax at a rate of 34% between the difference between the book value and the fair value. A_AG disclosed this to the tax authorities of the Canton of Berne and announced its intention to amend the purchase agreement. Such a supplementary agreement was subsequently also concluded between A_AG and A_NV (increase in purchase price to market value of EUR 108 million = additional payment of EUR 87.6 million). In its 2008 tax return, A_AG declared no profit from the sale of the investment and reported the investment in B_NV at EUR 0 in the notes. In its 2009 tax return, A_AG declared the payment of EUR 87.6 million as a capital gain from the sale of its stake in B_NV and claimed a participation deduction for this.
The tax administration assessed the A_AG for 2009 and corrected the participation deduction to CHF 0. The background to this correction was the view of the tax authorities that there was no income from the sale of investments in the amount of EUR 87.6 million, but rather a distribution of profit by A_NV. Since the financing expenses were determined in accordance with the profit tax values based on the profit tax value of A_NV, there was in fact no participation deduction.
The Tax Appeal Commission of the Canton of Berne dismissed the appeals of A_AG, whereas the Administrative Court of the Canton of Berne upheld them in its ruling 100.2015.216/217U of 12 May 2017. The tax administration then lodged an appeal with the Federal Supreme Court
The Federal Supreme Court considers the legal reason for the additional agreement in the amount of EUR 87.6 million to be not in the purchase agreement, but in the corporate law relationship between A_AG and A_NV. Contrary to the opinion of the lower court, it was not to be assumed that the agreement was an addition, but that the original agreement was de facto reversed and subsequently replaced by a genuine purchase agreement (E. 2.3.2). However, a rescission was only accepted for tax purposes if there was a lack of will in the original purchase contract (e.g. a fundamental error within the meaning of Art. 24 para. 1 CO), which had not been asserted in the present case (E. 2.4.1). Furthermore, it concluded that the facts of the hidden profit distribution had been fulfilled (E. 2.6), as a further payment in the amount of EUR 87.6 million was made after the execution of the original contract (E. 2.5.2) and this payment was obviously disproportionate to the original amount (E. 2.5.3). The Federal Supreme Court upheld the tax administration's appeal.
