Stephanie A. Brawand
Taxation of spouses in international relations
An "international" spouse relationship from a tax law perspective exists if only one spouse is subject to unlimited tax liability in Switzerland, while the other spouse has no or only limited tax liability in Switzerland. It must also be a legally and factually unseparated marriage. The taxation of such "international" spousal relationships is opposed by the addition of factors as prescribed by law. However, according to the established case law of the Federal Supreme Court, the latter - unlike in intercantonal relations - cannot create any tax liability in Switzerland.
In practice, the taxation of spouses in international relations repeatedly leads to legal and assessment difficulties. Spouses in international relations are defined as spouses who have unlimited tax liability in Switzerland, while the other spouse has no personal or economic affiliation in Switzerland. The spouses live in legally and actually unseparated marriage. When determining the tax base of the spouse who is taxable in Switzerland, the factor addition must be taken into account. A tax liability in Switzerland is only established on the basis of personal or economic affiliation. The tax liability is unlimited in the case of personal affiliation. In the case of limited affiliation, the tax liability is limited to the factors taxable in Switzerland, taking into account the progression proviso.
In the intercantonal relationship, the addition of factors justifies community taxation. The situation is different in international relations, where the addition of factors does not in practice justify joint taxation of spouses. According to the established case law of the Federal Court of Justice, an analogous application of the practice of dividing the tax factors in half when the main tax domicile and the family tax domicile do not coincide is not justified. This would lead to an unjustified unequal treatment, in particular in relation to taxpayers living in unseparated marriage.
Only the factors of the spouse who is taxed in Switzerland are to be taken into account for the determination of the relevant tax base. This also applies to international tax separation. It follows that only the debts and debt interest of the taxpayer liable for tax in Switzerland are to be taken into account and allocated proportionally according to the situation of his assets. The actual or notional factors of the spouse resident abroad may not be included in the tax assessment. The tax factors of the spouse who does not belong to the same tax group in Switzerland are to be taken into account exclusively for the determination of the applicable tax rate (rate determination) by applying the marriage tariff. Since the income and assets of the spouse resident abroad to be taken into account for determining the rate may not be determined on a discretionary basis, the maximum rates are used in practice.
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1. preliminary remarks
The taxation of spouses, which has always been anchored in tax law, has its origin in civil law, specifically in the old marriage law01. At the beginning of the century, the Civil Code (ZGB) in force at the time, under the heading "Rights and Duties", stipulated the following with regard to the husband: "The husband is the head of the community [...] and must provide for the maintenance of the wife and child in a due manner".02 The wife, on the other hand, supports the man with advice and assistance and must do her utmost to help him in his care for the community. "She runs the household".03 The wife's income and the natural fruits of the wives' estate become the property of the husband on the date of their maturity or separation, subject to the provisions concerning the special estate (art. 195 para. 3 aZGB).
The revision of marriage law, which came into force on 1 January 1988, took into account the changed circumstances of society and in particular of the marital community, which was reflected in the adoption of DGB04 and StHG05 in December 1990, however, was not followed up. Article 9 of the DBG regulates the "taxation of spouses" of the Federal Council's decision to levy a direct federal tax (BdBSt)06 Go on. The wife ran the household and - without the husband's consent - could not work elsewhere. The income from the assets belonged to the husband anyway, so it was justified to attribute and tax it to him. Accordingly, the wife also has no procedural obligations. The taxation of spouses in Switzerland has long been the subject of heated discussions and legal disputes.07 With the revision of the DBG and StHG it is clear that the wife herself is taxable and part of a tax relationship with her own rights and obligations. Reforms of family taxation with change to full splitting, (modified) individual taxation or family splitting08...failed. The popular vote of 28 February 2016 on the popular initiative "For marriage and the family - against the marriage penalty" was annulled by the Federal Supreme Court in a ruling of 10 April 2019.09 Even almost 20 years after the turn of the century, the "spouse taxation" still exists. The federal law "balanced couple and family taxation" is intended to revise the taxation of married couples.10
2.1 Tax affiliation
2.1.1 Personal affiliation
According to Art. 3 para. 1 DBG or Art. 3 para. 1 StHG, natural persons are taxable on the basis of personal affiliation if they have their tax residence or domicile in the canton or in Switzerland. A person has a tax domicile in the canton or in Switzerland if he/she is staying here with the intention of staying permanently or if federal law assigns him/her a special legal domicile (Art. 3 para. 2 DBG or Art. 3 para. 2 StHG). A stay within the meaning of Art. 3 Para. 3 DBG or Art. 3 Para. 1 StHG is deemed to exist if a person stays in the canton or in Switzerland for at least 30 days for the purpose of exercising a gainful activity or for at least 90 days without exercising a gainful activity, notwithstanding temporary interruptions.
2.1.2 Economic affiliation
- are owners, partners or beneficiaries of business operations in the canton or in Switzerland;
- maintain permanent establishments in the canton or in Switzerland;
- have ownership, real or economically equivalent personal rights of use of real estate in the canton or in Switzerland; or
- broker or trade in real estate located in the canton or in Switzerland.
- pursue a gainful activity in Switzerland;
- receive income as a member of the administration or management of legal entities with registered office or permanent establishment in Switzerland;
- are creditors or usufructuaries of claims secured by a lien on a Swiss property;
- receive benefits from an employer or a pension fund domiciled in Switzerland on the basis of a previous public-law employment relationship;
- receive benefits from Swiss private-law occupational pension institutions or from recognised forms of tied pension provision; or
- receive benefits for work in international transport from an employer with its registered office or place of business in Switzerland
2.1.3 Scope of the tax liability
At the level of direct federal tax, the scope of the tax liability is regulated in Art. 6 DBG. The StHG does not contain any such provision. Although this allows the cantons to issue their own provisions on the scope of tax liability, they are restricted in terms of intercantonal relationships by the prohibition of intercantonal double taxation.11
According to Art. 6 para. 1 DBG, the tax liability is unlimited in the case of personal affiliation. However, it does not extend to business operations, permanent establishments and land located abroad. In case of economic affiliation, the tax liability is limited to those parts of income and assets for which a tax liability exists in Switzerland according to Art. 4 and 5 DBG. According to Art. 6 para. 2 DBG, at least the income earned in Switzerland is taxable. If only part of the income and assets are subject to tax in the canton or in Switzerland, the tax on the assets taxable in the canton or in Switzerland is payable at the rate corresponding to the total income and assets (Art. 7 para. 1 DBG). Tax-exempt amounts are deductible on a pro rata basis.12
2.1.4 Residence under bilateral law
As explained above, a natural person may have unlimited or limited tax liability in the canton or in Switzerland, whereby the tax liability is linked to the personal or economic affiliation. If the tax liability in Switzerland is based on economic affiliation, this inevitably conflicts with the tax claims of the person's country of residence. Unless it is a business operation, a permanent establishment or a property abroad,13 as these are already unilaterally exempt from taxation under the DBG or cantonal law.
If there is a double taxation agreement between Switzerland and the other country, it is specified in the agreement which country has the right of taxation. The double taxation agreement can only limit a state's right of taxation, but cannot establish a new right of taxation. It goes without saying that a double taxation agreement can only apply to natural persons who are resident in one of the two contracting states. As a rule, an individual shall be considered a resident of the Contracting State in which he is subject to unlimited tax liability by reason of his domicile, permanent residence, place of management or similar reason.14 If an individual is considered to be subject to unlimited tax liability in both Contracting States on the basis of the above-mentioned characteristics, it must be determined on the basis of the criteria laid down in the respective double taxation agreement (so-called cascade) which Contracting State has the unlimited right of taxation.
If it cannot be decided on the basis of these criteria either, which Contracting State has the unlimited right of taxation, the competent authorities of the Contracting States must determine the residence of the natural person by mutual agreement. The other Contracting State may have a limited right of taxation on the basis of economic affiliation.
2.2 Factor addition
According to Art. 9 para. 1 DBG and Art. 3 para. 3 StHG, the income and assets of spouses who live in legally and factually unseparated marriage are added together without regard to the matrimonial property regime (so-called "factor addition").
Community taxation starts with marriage, i.e. it presupposes the existence of the marital union and a communality of means. Conversely, a de facto separation exists if, among other things, there is no joint marital home, the joint household is dissolved and thus the continuation of the marital community is no longer maintained. Such separation results in separate taxation of the spouses. However, the existence of two different places of residence does not in itself lead to the abolition of spousal tax.15 If the spouses live in legally and factually unseparated marriage, but only one spouse has his or her domicile or residence in Switzerland for tax purposes, while the other spouse lives abroad, the spouse resident in Switzerland is subjectively taxable for all his or her income and assets; this does not apply to business operations, permanent establishments and real estate located abroad.
At the latest since the end of the implementation period of the StHG on 1 January 2001, it has been clear that the wife herself is taxable and is part of a tax relationship with the canton from which she derives rights and obligations.16 Under the rule of the BdBSt, the historical legislator still saw the wife as the third party in the husband's assessment procedure, who was only included in the proceedings if there was nothing more to be gained from the husband.17 Although husband and wife are generally regarded as two tax subjects with their own rights and obligations, the Federal Supreme Court assumes in intercantonal relations that they are to be treated as a single entity for tax purposes, even if only one of the two spouses fulfils a characteristic of personal or economic affiliation to Switzerland.18
Different from the intercantonal relationship,19 However, Art. 9 DBG and Art. 3 para. 3 StHG do not in practice allow for joint taxation of spouses in international relations.20 In the cases assessed by the Federal Supreme Court to date, the other spouse was not taxable in Switzerland at all. There was no personal or economic affiliation in Switzerland.21 By judgment of 18 September 201822 the Federal Supreme Court explicitly stated for the first time that this practice is also applicable by analogy if one spouse has unlimited tax liability in Switzerland and the other spouse has only limited tax liability due to economic ties.
For the determination of the tax rate, the married couple's total income and assets must be taken into account, applying the married couple's tariff and the social deductions for married couples (so-called progression proviso; Art. 7 para. 1 DBG23). In international spouse relationships, the addition of factors only affects the determination of the rate, i.e. it is only decisive for the question of the tax rate applicable to taxable income and assets.24 However, the addition of factors has no effect on the subjective tax liability and the relevant tax base.25 The subjective tax liability of the spouses is based exclusively on the tax rates specified in Art. 3 et seq. DBG and Art. 3 ff. StHG laid down regulations. Each spouse is an independent tax subject and establishes its own tax relationship with the community.26
2.3 Joint and several liability
According to Art. 13 para. 1 DBG27 Spouses who live in legally and factually unseparated marriage are in principle jointly and severally liable for the total tax. This follows from the principle of fiscal unity of the family.28 If a spouse is only subject to limited tax liability in Switzerland or not at all, the joint and several liability within the meaning of Art. 13 para. 1 DBG must be waived, as this partner has only a limited or no tax relationship with Switzerland. As established in court practice, a spouse with limited tax liability in Switzerland is only liable to tax on income for which there is a tax liability under Art. 4 para. 1 DBG Art. 5 DBG or Art. 4 StHG. Joint taxation of spouses is not applicable.29
In its latest judgment of 15 August 201930 the Federal Supreme Court had to assess the question of liability in the context of the enforcement of an evasion fine. It first stated that the direct tax evasion procedure (Art. 175 et seq. DBG) - unlike the assessment and post-assessment procedure - is a criminal charge within the meaning of Article 6 para. 1 ECHR31 trade. The evasion fine as a criminal sanction has a highly personal character. It is not transferable and therefore not inheritable. A fine does not serve the property interests of the state, but only aims at punishing the perpetrators. Accordingly, under federal law there is no basis for the assumption of the spouses that the wife is also liable for the evasion fines imposed on the husband under Article 13 para. 1 DBG (qua factor addition). It follows from this that the evasion fine is not from the outset a "joint" fault of the spouses, but the sole fault of the delinquent.32
The Federal Supreme Court further states that it is different with regard to the tax seized: If a joint and several debt exists, it is up to the creditor to decide which of the jointly and severally liable persons he wants to prosecute.33 He may choose to claim only a part or the whole from all joint and several debtors (Art. 144 Par. 1 CO). This also applies to the relationship between the entitled community and the person liable to pay the levy.34 In the case of spouses who meet the requirements of Art. 13 para. 1 DBG, the assessment authority may operate both, one or the other spouse.35 This applies all the more if it concerns orders of seizure (Art. 169 DBG), as this is only a provisional measure which has no influence on the existence and amount of the tax claim and therefore does not prejudice anything.36
2.4 Procedural obligations
Spouses jointly exercise the procedural rights and obligations of the taxpayer (Art. 113 para. 1 DBG and Art. 40 para. 1 StHG). Thus, the principle set out in Article 8(3) BV37 The principle of equal rights between men and women and equal treatment of spouses in tax proceedings was taken into account in the decision.38 From this it can be derived that the spouses are to be assessed together as taxable persons with equal rights in the same procedure. The necessity of joint assessment of spouses already arises from Art. 9 para. 1 DBG and Art. 3 para. 3 StHG (factor addition). The joint assessment requires - as explained above - in turn that both spouses are subjectively liable to tax in Switzerland or the canton. This is the case for tax liability both on the basis of personal affiliation and economic affiliation.39 It does not matter whether the spouses are taxable in the same way. The only important thing is that they can be assessed in the ordinary procedure.40
It also requires that the spouses live in legally and factually unseparated marriage.41 As a consequence, in the event of legal or de facto separation, the spouses are taxed separately and exercise their procedural rights and obligations separately.42
3. interim conclusion
If only one spouse is taxable in Switzerland on the basis of personal or economic affiliation, while the other spouse has no tax connection in Switzerland, there is also only a tax relationship. Under civil law, the spouses can each determine their place of residence independently (see Art. 23 ZGB). Consequently, if one spouse does not have tax affiliation in Switzerland, no joint assessment can be made. Spouses resident abroad are therefore not subject to any procedural or cooperation obligations in the assessment procedure.
Nor may it be concluded from the principle that the economic capacity of the spouses is expressed in terms of their total income and assets that the spouses are obliged to cooperate for the entire marital income and assets. The taxpayer who is legally and factually in an unseparated marriage can only be fined for evading his own tax factors, i.e. his own income and assets.43 As a result, each spouse is only obliged to cooperate for their own tax factors. It is therefore subject only to procedural obligations in this respect.44 Consequently, the assessment authority can only require the spouse who is taxable in Switzerland to comply with the obligation to cooperate with regard to his or her own tax factors.45
If both spouses are not subjectively taxable in Switzerland, the procedural status is limited to the spouse subjectively taxable in Switzerland. In this case, the latter is assessed separately and individually as a taxable person. The other spouse has the position of a third party and is obliged to cooperate in the same way as other third parties, i.e. to provide information and certification.46 However, taking into account the right to be heard within the meaning of Art. 29 para. 2 BV, the person not subjectively taxable in Switzerland must be granted the right to inspect files - analogous to the intercantonal relationship - because the factors of the spouse resident abroad are used to determine the rate.47
4.1 Starting point: intercantonal spousal relationships
The starting point for the taxation of spouses in international relations is the case law in the intercantonal relationship to family establishment. In intercantonal relations, a distinction must be made between
- a couple have separate residences in two different cantons, but live in a legally and factually unseparated marriage and share the available resources, or
- a married couple has a joint residence, whereby one spouse is also subject to limited tax liability in a canton other than the canton of residence.
In the first case, according to established case law, the couple's movable income and assets must be divided equally between the cantons concerned and taxed at the full rate in each canton.48 This legal practice is also justified from the point of view of the unity of economic capacity of spouses in the case of joint use of funds.49
In the second case, the Federal Court ruled that the spouses are jointly liable for tax at the secondary tax domicile, even if only one of the two has an economic link to the secondary tax domicile.50 According to the Federal Supreme Court, individual taxation of the spouses in such cases would not be compatible with the applicable federal law.51 In addition, a change in court practice towards individual taxation would have undesirable effects in terms of substantive and procedural law if only one spouse had a secondary tax domicile.52
4.2 Personal or economic affiliation of only one spouse
The question of whether and to what extent the factors of the spouse resident abroad should be taken into account for the assessment in the case of a spouse's limited or unlimited tax liability in Switzerland has been the subject of various court decisions.
4.2.1 Judgment of the Zurich Tax Appeal Commission of 7 April 1991
In the 1990s, the Tax Appeal Commission of the Canton of Zurich had to judge a case in which the husband had transferred his residence from Sweden to Switzerland for professional reasons, while his wife and daughter remained in their own single-family home in Sweden.53 Due to the non-controversial unlimited tax liability of the husband in Switzerland, the income from gainful employment, the private share in the company car and the investment income of the husband were transferred to Switzerland in the subsequent assessment procedure. According to Sweden, income from employment and capital income of the wife and real estate income were excluded. On the other hand, the husband lodged an objection with the Tax Appeal Commission of the Canton of Zurich with the request that, based on the conflict rules of intercantonal double taxation law, the marital income and assets - after the property was transferred to Sweden - should be divided equally between the two states.54 The Tax Appeals Commission rejected the objection, as the rules of the respective double taxation agreement were to be consulted in international law in the case of separation issues. The conflict-of-law rules of intercantonal double taxation law are not applicable to international relations from the outset. According to cantonal law, both the entire income and the assets of a husband who is taxable in Switzerland are subject to taxation in the canton of Zurich at the rate for the entire marital income and assets. The double taxation agreement between Switzerland and Sweden does not restrict this right of taxation.
4.2.2 Judgment of the Zurich Administrative Court of 14 September 1993
The taxpayer's appeal to the Administrative Court of the Canton of Zurich was upheld.55 The Administrative Court held - under the law in force at the time - that spouses living in legally and factually unseparated marriage were each solely liable to tax on the entire income and assets of the marital community. Marital income and assets are indivisible tax objects and the economic capacity of the spouses results from this. Since the present double taxation law does not restrict Switzerland's right of taxation in this matter, there would have to be a domestic legal basis for the Canton of Zurich to tax the husband's income and assets without restriction. Otherwise, the intercantonal conflict-of-law rules, according to which marital income and property must be divided equally between the two states, would apply analogously.56 The Canton of Zurich has subsequently amended its law to provide that a spouse resident in Switzerland is taxable in the Canton for all his or her income and assets if the other spouse is resident abroad.57
The approach of the Zurich Administrative Court must be critically assessed. The Federal Supreme Court has consistently held that the regulations on intercantonal taxation are in principle not applicable at international level.58
In the intercantonal relationship, in cases where the main tax domicile and the family tax domicile fall apart in the case of legally and factually unseparated marriage, the communality of the use of funds and thus the economic capacity of the spouses is taken into account by dividing the movable marital income and assets in half at the total rate. However, such an approach is not justified in international relations.59 Moreover, this practice would lead to unjustified unequal treatment compared to, inter alia, taxpayers living in unseparated marriage, as part of the income taxable in Switzerland would remain tax-free.60 In the authors' opinion, the legal basis for the exclusive taxation of the spouse who is dependent on his or her spouse in Germany would have already resulted from the husband's personal tax affiliation under Article 3 DBG or Article 3 StHG in the circumstances described above. The factors of the wife resident in Sweden without any tax connection to Switzerland would also have had to be taken into account "de lege lata" only for determining the rate. In addition, Art. 9 DBG and Art. 3 para. 3 StHG cannot establish joint taxation of spouses in international relations.
4.2.4. judgment of the Zug Administrative Court
A taxpayer resident in the Canton of Zug, whose wife and daughter were tax resident in Italy, then referred to the aforementioned ruling of the Administrative Court of Zurich of 14 September 1993. The taxpayer argued that due to the lack of a legal basis at both cantonal and federal level, only half of the couple's income could be taxed in Switzerland, even though the Swiss-Italian double taxation agreement gives Switzerland the right of taxation.61 The Administrative Court of the Canton of Zug then rightly - but with a different justification - denied in its ruling that the tax factors were divided equally between Switzerland and Italy. In contrast to intercantonal relations, double taxation in international relations cannot be excluded per se. The double taxation agreement contains its own conflict-of-law rules which deviate from internal law. It cannot be concluded from this that there is no legal basis in domestic law for taxation in international circumstances. The income and assets of the spouse resident in the Canton of Zug are taxable there at the rate of the total taxable income or total assets of the spouses.62
4.2.5 Subsequent practice of the Federal Court
In the following years, the Federal Supreme Court confirmed the practice according to which all income and assets of a spouse who is resident in Switzerland for tax purposes and whose marriage is not legally and factually separated, but whose spouse is resident abroad for tax purposes, are taxable in Switzerland. The tax rate must be based on the total marital income and assets and the marriage rate must be applied.63 The only exception to this is if this taxation is restricted by a double taxation agreement.64
4.2.6 Judgment of the Zurich Administrative Court of 30 October 2013
Based on this, the Administrative Court of the Canton of Zurich ruled in its ruling of 30 October 2013 that taking into account the income of the husband resident abroad for the purpose of determining the rate of taxation does not lead to inadmissible double taxation.65 In this case, the husband was an official in the service of the European Commission for life, residing in Germany and working in Luxembourg. The wife with unlimited tax liability in Switzerland argued that, due to the physical separation, the marriage was actually separated due to the professional commitment of both spouses and the separate use of funds and that the marriage did not bring her any economic advantages, at least during her lifetime. From the point of view of taxation according to economic capacity, it should therefore also be treated as a single person. The couple spent at least part of their work-free time together. According to the practice of the Federal Court, the decisive factor for the taxation of spouses is not only whether the funds are used jointly (economic unity), but also whether the spouses wish to continue their community (personal circumstances). Thus, from a tax point of view, an unseparated marriage also exists if the spouses are physically separated and there is no joint use of funds, but both spouses wish to continue the marriage. The spouses shall be taxed separately only if they dissolve the conjugal relationship by a permanent separation or by agreement.66
Moreover, it follows from court practice that if one spouse is only liable for economic tax, it cannot be assumed that the limited tax liability also applies to the other spouse. The conditions for the existence of a tax liability (economic or personal) in Switzerland must be checked separately for each spouse.67 A spouse may not be included in the assessment of the spouse with limited tax liability without being audited. This also applies to international tax separation, which forms part of the determination of the tax base (see in detail below "Personal affiliation of one spouse and economic affiliation of the other spouse"). "A joint assessment requires that both spouses are subjectively taxable in Switzerland and live in legally and factually unseparated marriage.68
4.3 Personal affiliation of one spouse and economic affiliation of the other spouse
4.3.1. judgment of the Federal Court 2A.421/2000 of 11 May 2001
In the context of the judgment of 11 May 200169 the Federal Supreme Court further developed its practice for cases in which one spouse has unlimited tax liability in Switzerland and the other spouse has only limited tax liability.
This was a married couple of Austrian nationality, where the husband had unlimited tax liability in Switzerland but the wife had limited tax liability due to co-ownership of real estate. As a full professor at the University of St. Gallen, his husband was gainfully employed and also earned additional income from self-employment. He lived in a single-family house in St. Gallen, which the couple owned in joint ownership. The wife was a self-employed artist and after living together in a single-family house in St. Gallen for a few years, she moved into a condominium in Linz (Austria).
The husband first applied to the Administrative Appeals Commission of the Canton of St. Gallen that, due to the double taxation practice of the Federal Supreme Court in Switzerland, only half of the joint income and assets were taxable in Switzerland, as the wife had acquired a condominium in Austria and had also established her residence there. In its decision, the Administrative Appeals Commission stated that a spouse who is subject to unlimited tax liability in Switzerland can only be taxed on his or her own part of income. Moreover, the spouse with limited tax liability is subject to the tax jurisdiction of Switzerland only to the extent of his or her limited tax liability.70 The limited tax liability is based on the rate of the total income and assets. Since the unlimited taxation of the spouse who lives and works in Switzerland is at the marriage rate, it cannot be argued that the couple as a whole is taxed more heavily than a single person.
The Federal Supreme Court protected the opinion of the lower court.71 Both the lower court and the Federal Supreme Court rightly reiterated that the principles for avoiding double taxation established for intercantonal relationships cannot be applied telquel to international relationships.72 The aim of the national practice of dividing the tax factors in half is to ensure that, where spouses have separate main tax domiciles, each canton can benefit from the economic capacity of the spouse resident in that canton. If, under international conditions, only half of the tax factors of spouses were taxed in Switzerland, this would possibly result in income earned in Switzerland being only partially taxed here and not taxed at all in the other country.73 The lower court also stated that the division of factors into halves in international relations was arbitrary, since it was assumed that each spouse used exactly half of the total income and assets.74 However, this is "in obvious contradiction to the constitutional principle of equality of rights and the principle of taxation according to economic performance derived from it".75.
4.3.2 Federal Supreme Court judgement 2C_799/2017 and 2C_800/2017 of 18 September 2018
In its recent judgment of 18 September 201876 the Federal Supreme Court held that in the case of limited tax liability in Switzerland and unlimited tax liability abroad, it is necessary to examine for both spouses which income components are attributable to which spouse, since the respective spouse is only liable for tax on those factors that can be directly attributed to him or her.
The Federal Supreme Court extended its consistent practice, according to which an addition of factors within the meaning of Art. 9 para. 1 DBG and Art. 3 para. 3 StHG in international relations, in contrast to intercantonal relations, could not only then not establish joint taxation of spouses,77 if the other spouse is not taxable in Switzerland at all, but also in those cases in which the other spouse has a limited tax liability in Switzerland due to economic affiliation. It can be concluded from this that the tax factors of spouses who both have only limited tax liability in Switzerland must be recorded and declared separately, as joint taxation of spouses and factor addition are not permitted. It is now questionable whether in such cases in practice a separate tax return is actually submitted for each spouse, especially if the tax liability is limited to co-owned property.78
4.3.3 Open questions regarding debt and debt interest in the context of international tax avoidance
The question of (proportional) debt and debt interest transfer in the context of international tax separation is still not resolved by the highest courts.
Suppose only one spouse has unlimited tax liability in Switzerland, while the other spouse has no or only limited tax liability. If the person with unlimited tax liability declares his debts and debt interest, these are to be relocated correctly according to the situation of the assets of the person with unlimited tax liability in Switzerland. Any consideration of the factors of the spouse who is resident abroad and who is not or only to a limited extent taxable in Switzerland for the "purposes" of determining the rate in the tax assessment would be contrary to the above-mentioned principles of the Federal Supreme Court and is without any legal basis. The international tax segregation is part of the determination of the tax factors and thus the determination of the tax base of the spouse who is subject to unlimited taxation in Switzerland.
The addition of factors set out in Art. 9 para. 1 DBG and Art. 3 para. 3 StHG merely states that the tax factors of the other spouse are to be taken into account for determining the rate. It does not create any tax liability of the other spouse in Switzerland. Such a requirement results exclusively from the provisions of Art. 3 - 5 DBG79 and Art. 3 and 4 StHG, respectively, on personal and economic affiliation. As a consequence, however, only the debts and debt interest of the spouse with unlimited tax liability in Switzerland or his or her "half" in the case of joint and several liability must be declared. If the other spouse is subject to limited tax liability in Switzerland due to economic affiliation - which is practical in the case of co-owned or sole ownership - the tax factors for this spouse must be determined separately, taking into account his or her debts and debt interest, and the factors of the spouse with unlimited tax liability in Switzerland must be taken into account exclusively for the determination of the rate. In practice, experience has shown that such constellations entail system-related difficulties. Practical examples have shown in the past that the factors of the spouse resident abroad are included in the international tax assessment for the determination of the rate. This is not correct in the opinion of the authors.
The following should also be noted: If only one spouse is tax resident abroad and there are no tax implications for the other spouse, the taxpayer in Switzerland cannot be required to disclose the factors of the spouse resident abroad within the scope of his or her obligations to cooperate and to follow procedures in accordance with Art. 113 para. 1 DBG and Art. 40 para. 1 StHG. Each spouse is only liable for his or her own tax factors and is therefore only obliged to cooperate. The spouse resident abroad, in turn, is not subject to any procedural or cooperation obligations due to the lack of tax affiliation.80 This also applies to the discretionary determination of the tax factors of the spouse resident abroad. Discretionary tax assessment is permissible if the taxpayer has breached his procedural obligations (cf. Art. 130 para. 2 DBG).81 This is particularly lacking in the case of the spouse who does not belong to the family in Switzerland for the reasons just mentioned. In such cases, income and assets taxable in Switzerland are taxed at the maximum rate for the purpose of determining the rate.
In summary, the following can be stated: If one spouse is personally related in Switzerland while the other spouse has no or only limited tax liability in Switzerland, the tax base must be determined separately for each spouse. Based on the addition of factors, in these cases the other spouse's income and assets are only to be taken into account for determining the applicable tax rate. Art. 9 para. 1 and Art. 3 para. 3 StHG cannot establish a common tax liability in Switzerland in international relations. The international tax separation is part of the determination of the tax base of the spouse who is taxable in Switzerland. The tax factors of the spouse resident abroad must not be included. There is no appropriate legal basis for this. If the other spouse, who is resident in the other contracting state in accordance with the relevant DBA, establishes economic affiliation in another canton, neither spouse is liable for tax in the other canton on the basis of the addition of factors. For each spouse, the factors taxable in Switzerland or in the respective canton must be determined separately. However, the total income or assets must be taken into account when determining the rate.
01 Before the revision of marriage law, which came into force on 1.1.1988.
02 Article 160 of the Civil Code.
03 Art. 161 para. 3 aZGB; Behnisch, Urs, Probleme der Ehewattenbesteuerung, in: jusletter.ch of 7 August 2000, para. 1 ff.
06 AS 56 1947.
07 Behnisch, jusletter.ch of 7 August 2000, para. 26.
08 Message on the 2001 tax package of 28 February 2001, BBl 2001, 2983 ff. (quoted in the message on the 2001 tax package), 2992 ff.; see also the report of the expert commission on the review of the Swiss system of family taxation headed by Peter Locher, submitted to the Department of Finance, Bern 1998.
10 On 14 August 2019, the Federal Council adopted a supplementary message to the Federal Act on "balanced taxation of couples and families", BBl 2019 5787.
11 Oesterhelt Stefan/Seiler Moritz, in: Zweifel Martin/Beusch Michael (eds.), Commentary on Swiss Tax Law, Federal Law on the Harmonisation of Direct Taxes of the Cantons and Communities (StHG), 3rd edition, Basel, Art. 4 N 10 (quoted author, in: Zweifel/Beusch, Komm. StHG).
12 This is also the case in § 6 para. 1 of the Tax Act of the Canton of Zurich.
13 Cf. above "2.1.3. scope of tax liability".
14 Art. 4 para. 1 OECD Model Tax Convention 2017 on Income and on Capital of 21 November 2017 (OECD-MA).
15 Locher Peter, Commentary on the DBG, Federal Law on Direct Federal Taxation, Part 1, Therwil/Basel 2001, Art. 9 Sentence 9 ff. (cited Locher, Komm. DBG); KS ESTV No. 30 of 21.12.2010 "Taxation of Married Couples and Families", 1.3.
16 Oesterhelt Stefan/Seiler Moritz, in: Zweifel/Beusch, Komm. StHG, Art. 3 N 93 f.; see also "1. preliminary remarks" above.
17 Behnisch, jusletter.ch, para. 7; Art. 90 para. 7 BdBSt.
20 Judgments of the Federal Court 2C_799/2017 and 2_800/2017 of 18 September 2018, E. 126.96.36.199 = ZStP 4/2018, p. 295 et seq. = StR 74 (2019), p. 53 et seq.
21 Federal Court judgement 2C_1205/2013 of 18 June 2015, E. 2.2; Federal Court judgement 2A.421/2000 of 11 May 2001 in StE 2001 B 11.3 No. 12, E: 3c.
22 Judgments of the Federal Court 2C_799/2017 and 800/2017 of 18 September 2018, E. 188.8.131.52 = ZStP 4/2018, p. 295 et seq. = StR 74 (2019), p. 53 et seq.
23 Judgment of the Tax Appeal Commission of the Canton of Zurich of 7 April 1993 in StE 1993 B 11.3 No. 6, E. 2; see also "Personal or economic affiliation of only one spouse"; There is no analogous provision in the Tax Harmonisation Act.
24 See also Federal Supreme Court decision 2A.421/2000 of 11 May 2001 in StE 2001 B 11.3 No. 12, E. 3 dd; Federal Supreme Court case law confirmed in decision of the Tax Appeal Commission of the Canton of Zurich of 26 September 2002, 1ST.2001.454.
25 Reich Markus, tax law 2nd ed., Zurich 2012, § 12 N 18 (cited Reich, tax law).
26 punches, come on. DBG, Art. 9 Rz. 21; so also Richner Felix/Frei Walter/Kaufmann Stefan/Meuter Hans-Ulrich, Commentary on the Zurich Tax Act, 3rd ed., Zurich 2013, § 7 N 23 (cited Richner/Frei/Kaufmann/Meuter, Komm. ZH).
27 There is no analogous provision in the Tax Harmonisation Act; for example, § 12, Subsection 1, StG ZH.
29 Judgment of the Federal Court 2C_799/2017 and 2C_800/2017 of 18 September 2018, E. 184.108.40.206 f. = ZStP 4/2018, 295 ff. = StR 74 (2019), p. 53 ff.
30 Judgment of the Federal Court 2C_689/2019 of 15 August 2019 = StR 74 (2019), p. 746 ff. = ASA 88 (2019/2020), p. 349 ff.
32 Judgment of the Federal Court 2C_689/2019 of 15 August 2019, E. 2.2.2 - 2.2.4 = StR 74 (2019), p. 746 ff. = ASA 88 (2019/2020), p. 349 ff.
33 Judgment of the Federal Court 2C_689/2019 of 15 August 2019, E. 2.2.6 = StR 74 (2019), p. 746 et seq. = ASA 88 (2019/2020), p. 349 et seq.; thus already Judgment of the Federal Court 2C_498/2016 of 3 June 2016, E. 6 on Article 13 para. 1 DBG.
34 Judgments of the Federal Court 2C_58/2015 and 2C_59/2015 of 23 October 2013, E. 5.1 = ASA 84 (2015/2016), p. 391.
35 Curchod Pierre, in: Yves Noel/Florence Aubry Girardin (ed.), Commentaire romand, LIFD, 2nd edition 2017, Art. 165 N 10.
38 Cf. also Zweifel Martin/Casanova Hugo/Beusch Michael/Hunziker Silvia, Schweizerisches Steuerverfahrensrecht Direkte Steuern, 2nd ed., Zurich 2018, § 17 N 1 (cited Zweifel/Casanova/Beusch/Hunziker, Steuerverfahrensrecht).
39 Zweifel/Casanova/Beusch/Hunziker, Steuerverfahrensrecht, § 17 N 4 also to the following.
41 BGE 138 II 300, E. 2.1 = StR 67 (2012), p. 586 ff. = StE 2012 B 11.1 No. 23 = BStPra XXI 108.
42 Instead of many: BGE 133 II 305, E. 4.1.
44 Judgement of the Zurich Administrative Court of 17 December 2004, SR.2013.00008. E. 3.4.2; KS FTA No. 30 of 21.12.2010 "Marriage and Family Taxation", 15.2.
45 Zweifel/Casanova/Beusch/Hunziker, tax procedure law, § 17 N 13.
47 Zweifel/Casanova/Beusch/Hunziker, Tax Procedure Law, § 17 N 16.
48 Höhn Ernst/Mäusli Peter, Interkantonales Steuerrecht, 4th edition, Bern, Stuttgart, Vienna 2000, § 20 N 5; Locher Peter, Das Interkantonale Doppelbesteuerungsrecht, in Die Praxis der Bundessteuern, Part III, § 3, I B, in particular No. 2, 4 and 7; KS ESTV No. 30 of 21.12.2010, Ehepaar- und Familienbesteuerung, 1.3.
49 Judgment of the Zurich Administrative Court of 14 September 1993 in StE 1994 B 11.3 No. 8, E. 2.b.
53 Judgment of the Zurich Tax Appeal Commission of 7 April 1991 in StE 1993 B 11.3 no. 6; on 14 September 1993, the Zurich Administrative Court upheld an appeal against this decision in StE 1994 B 11.3 no. 8.
54 Judgment of the Zurich Tax Appeal Commission of 7 April 1993 in StE 1993 B 11.3 No. 6, SV B.
55 Judgment of the Zurich Administrative Court of 14 September 1993 in StE 1994 B 11.3 No. 8; pre-institutional decision of the Zurich Tax Appeal Commission of 7 April 1993 in StE 1993 B 11.3 No. 6.
56 Judgment of the Zurich Administrative Court of 14 September 1993 in StE 1994 B 11.3 No. 8; pre-institutional decision of the Zurich Tax Appeal Commission of 7 April 1993 in StE 1993 B 11.3 No. 6, E. 2.b) and 2.c).
57 See also the ruling of the Tax Appeal Commission Zurich of 26 June 2002, 1ST.2001.454; § 7 para. 2 StG ZH; there is no analogous legal provision for direct federal tax, however, the conclusion is implicit in Article 6 para. 1 in conjunction with Art. 7 para. 1 DBG.
59 Locher/Meier/von Siebenthal/Kolb, DBA D-CH, B. 4.2. no. 33, E. 3a: The assumption of a fifty-fifty division of factors is even arbitrary, as it is based on the fiction that each spouse uses exactly half of the total income and assets; see also below "Personal affiliation of one spouse and economic affiliation of the other spouse".
60 Also critical is Federal Court judgement 2A.421/2000 of 11 May 2001, E. 3e in StE 2001, B 11.3 No. 12.
61 Locher/Meier/von Siebenthal/Kolb, DBA D-CH, B. 4.2. no. 27, I.D.
62 Locher/Meier/von Siebenthal/Kolb, DBA D-CH, B. 4.2. no. 26, II.2. and II. 3.
63 Federal Supreme Court decision 2A.421/2000 of 11 May 2011 in STE 2001 B 11.3 No. 12 (leading decision); instead of many: BGE 138 II 300, E. 2.3.
68 Judgment of the Cantonal Court of Lucerne of 12 June 2018, LGVE 2018 IV No. 18, E. 3.2; cf. also above "2.4. procedural obligations".
69 Federal Court judgement 2A.421/2000 of 11 May 2001 in StE 2001, B 11.3 No 12.
70 So also Locher/Meier/von Siebenthal/Kolb, DBA D-CH, B 4.2 No. 33, E. 3.d) aa).
71 Federal Court judgement 2A.421/2000 of 11 May 2001 in StE 2001, B 11.3 No 12.
72 Federal Court judgement 2A.421/2000 of 11 May 2001, E. 3e in StE 2001, B 11.3 No. 12.
73 Judgment of the Federal Court 2A.421/2000 of 11 May 2001, in particular E. 3c in StE 2001, B 11.3 No. 12.
74 Locher/Meier/von Siebenthal/Kolb, DBA D-CH, B 4.2, No. 33, E. 3a.
75 Locher/Meier/von Siebenthal/Kolb, DBA D-CH, B 4.2, No. 33, E. 3.d) bb).
76 Judgment of the Federal Court 2C_799/2017 and 2C_800/2017 of 18 September 2018, E. 220.127.116.11 f. = ZStP 4/2018, 295 ff. = StR 74 (2019), 53 ff.
77 Cf. also "2.2. addition of factors" above.
78 Commentary on the Federal Supreme Court judgements 2C_799/2017 and 2C_800/2017 of 18 September 2018 in ZStP 4/2018, Decisions, 24th tax jurisdiction decision and international tax liability of spouses, p. 314.
79 It also follows from the structure of the law, First Title: Tax liability, Chapter 1: Fiscal affiliation, Section 1: Personal affiliation or Section 2: Economic affiliation.
80 See also above under "2.4. procedural obligations".