1. facts of the case
The couple A. and B. lived in Binningen in a condominium with a living space of 336m2 (excl. terrace) and had two car parking spaces where their two cars, a Maserati GranTurismo and a Ferrari 458, were parked. In September 2015, the wife was dismissed without notice by her employer, G. AG, on leave of absence.
In mid-November 2015, the couple registered at the counter of the Residents' Services of the municipality of Binningen and at the counter of the Residents' Office of the municipality of Wollerau. On the homepage of the municipality of Binningen you can read: "We wish you all the best in your new place of residence" and on the homepage of the municipality of Wollerau "We welcome you warmly! The three Schwyz municipalities of Feusisberg, Freienbach and Wollerau lead the Swiss tax ranking. On the homepage of the district of Höfe, however, there is a reservation which must be taken seriously for intercantonal tax planning: "It is not in the interest of the three Höfn communities to support or tolerate [...] sham domiciles.
The couple rented a furnished 2½ room apartment on the first floor of a single-family house in Wollerau with a living space of 140m2 for a rent of Fr. 800.-. The husband continued to work in Basel. Subscriptions with telecommunications providers (Swisscom, Cablecom) have been cancelled or newly concluded and the address with the health insurance company has changed. The two vehicles were not re-registered and remained available in Binningen. The condominium in Binningen was not let or sold and left in its original condition with all furnishings.
Shortly after the registration in Binningen and the registration in Wollerau, the couple set off on a world tour lasting several weeks until mid-January 2016.
In a letter dated 7 March 2017, the tax administration of the Canton of Schwyz informed the couple that, based on findings from an inspection by the Wollerau Municipal Tax Office, it felt compelled to revoke the assessment ruling on direct federal tax and cantonal taxes for the 2015 tax period. The municipal tax office in Wollerau deleted the couple from the tax register retroactively due to a dummy domicile. The Tax Administration of the Canton of Schwyz informed the Tax Administration of the Canton of Basel-Landschaft. Subsequently, the tax administration of the Canton of Basel-Landschaft assessed the couple for direct federal tax and state tax for the 2015 tax period by decree of 24 April 2017.
2. dispute before the Federal Supreme Court
2.1 Place of tax residence
The place of residence of the couple for tax purposes on 31 December 2015 for the purposes of cantonal and communal taxes was disputed before the Federal Supreme Court. The tax residence on the last day of the calendar year is of tax significance for the taxation of natural persons. In 2015, the couple was taxable for cantonal and municipal tax purposes in the canton in which they had their tax residence on 31 December 2015. The case before the Federal Supreme Court thus concerned the taxation of the couple's income in 2015 and the couple's assets as at 31 December 2015.
2.2 Position of the couple
The couple took the view that their tax residence on 31 December 2015 was in Wollerau. In addition, the condominium in Binningen was to be taken into account in the context of an intercantonal tax assessment.
The couple argued that their wife had been given notice of termination with leave of absence in September 2015 and that this had been accompanied by a desire to leave the Basel region and move to the Höfe region. The wife had intended to set up a self-employed business in the wine trade business using an online platform after her release. It had therefore been looking for a property to buy or a project to build in the region, which is why the 2½ room apartment had temporarily served as a rental location. However, the situation regarding the purchase or construction of a property in Wollerau had turned out to be difficult. Furthermore, the spouses argued that due to their comfortable financial situation, it had not been necessary to immediately rent or sell the condominium in Binningen.
2.3 Position of the Tax Administration of Basel-Landschaft Canton
The tax administration took the view that the tax residence on 31 December 2015 was in Binningen. The remarkably low rent of CHF 800 for an apartment "in the tax haven of Switzerland" is in itself sufficient indication that the domicile in Wollerau is a sham domicile.
3. considerations of the Basel-Landschaft Cantonal Court
The Cantonal Court quoted the considerations of the tax court, according to which the couple had left the condominium in Binningen in its original condition with all furnishings. According to the applicant, there was therefore no removal of all and not only of personal effects. On the credit card statements submitted, which were apparently intended to prove that the couple had taken up residence in Wollerau, neither a name nor a credit card number nor any other information was apparent which would allow a concrete conclusion to be drawn about the couple. Even the submitted photos of the alleged move from Binningen to Wollerau did not allow any concrete conclusions to be drawn about the couple. Moreover, it is unlikely that photographs of the purchase of furniture in a large furniture store would be taken by chance and in the stress of everyday life or moving house. The vehicles that had not been re-registered would clearly indicate that the residence had always been in Binningen.
The cantonal court pointed out to the couple that their three vehicles had not been declared in the 2015 Schwyz tax return and granted them a period of time to rectify the situation. The couple claimed that their three vehicles had already been completely written off in 2015 and were therefore not declared in the Schwyz tax return 2015.
The Cantonal Court had examined the legal question of tax residence as of 31 December 2015 with the following objective indications:
- There was a striking discrepancy between the large and luxurious condominium in Binningen and the rented 2½ room apartment in Wollerau.
- The condominium in Binningen was neither rented nor sold.
- The husband continued to work in Basel.
- The rent for the 2½ room apartment in Wollerau appears low and therefore not in line with the market.
- The couple's three vehicles were not re-registered in the canton of Schwyz.
4. considerations of the Federal Court
4.1 Establishment of a new tax residence
First of all, the Federal Court deals with the determination of the place of tax residence and the establishment of a new tax residence:
According to the Federal Court's case law, the tax domicile of a natural person is the place where the centre of life interests is located. That place shall be determined by reference to all the objective circumstances from which those interests can be identified. The tax domicile is therefore not freely selectable. The place where the natural person is entered in the population register is not decisive.
Two characteristics must be fulfilled in order to establish a new tax residence:
- An objective, external characteristic: the stay, and
- a subjective, inner characteristic: the intention to stay permanently. It does not depend on the inner will. The decisive factor is which intention is objectively identifiable. The outwardly recognizable intention must be aimed at permanent residence.
4.2 Burden of proof and obligation to cooperate
The Federal Supreme Court then distinguishes between the burden of proof on the part of the tax authorities and the duty to cooperate on the part of the taxpayer:
- The facts on which the determination of the place of residence for tax purposes is based are taxable and therefore have to be proved by the tax authorities.
- However, the taxpayer is obliged to cooperate and to provide comprehensive information on the circumstances relevant for taxation. This obligation to cooperate applies in particular to the abandonment and establishment of a tax domicile.
In recital 5.1.4, the Federal Supreme Court reaches the point that is decisive for the outcome of the proceedings: "The taxpayer is, however, obliged to cooperate and to provide comprehensive information on the circumstances relevant for taxation [...]. This includes not only the final resolution of the links with the previous residence, but also the presentation of the factual circumstances which led to the establishment of the new residence [...].01 According to the case law cited by the Federal Supreme Court, once established, the residence remains in principle until the acquisition of a new one (BGE 138 II 300, E. 3.4). The Basel-Landschaft Cantonal Court had already referred to this fiction under tax law in connection with the taxable person's duty to cooperate, referring to the case law of the Federal Supreme Court (810 18 59, recital 4.5).
4.3 Indications
In the present case, the Federal Tribunal based its determination of the place of residence for tax purposes primarily on the housing situation on 31 December 2015. At the relevant time:
- the couple was the owners of a condominium in Binningen with more than twice the living space than the 2½ room apartment in Wollerau, which they rented and furnished for CHF 800 on the first floor of a single-family house;
- the couple had not rented and not sold the property in Binningen;
- the husband continued to work in Basel; and
- the couple was on a longer trip around the world, which they embarked on shortly after logging out in Binningen and shortly after registering in Wollerau.
4.4 Conclusion
In the light of these circumstances, the Federal Supreme Court concluded that the circumstances to be taken into account for the assessment of the legal question do not suggest the abandonment of the tax residence and the establishment of a new tax residence in Wollerau as of 31 December 2015. The Federal Supreme Court further states that the cancellation of subscribers with telecommunications providers and changes of address with health insurance companies are weak indications that take a back seat compared to the housing situation.
5. final remarks
A prerequisite for the transfer of tax residence is not only the definitive dissolution of links with the previous residence, but also the establishment of links with the new residence. The transfer of residence presupposes the giving up of the previous residence and the establishment of a new residence. In principle, the abandonment of the previous place of residence is not sufficient in itself.
As part of the duty to cooperate, the taxpayer must present the actual circumstances that led to the establishment of the new place of residence. The new housing situation must materialise in an objective way. In the present case, this materialisation would have consisted, for example, in renting the owner-occupied flat in Binningen and re-registering the Maserati GranTurismo and Ferrari 458 in Schwyz.
The couple planned their several-week trip around the world either too early, too long or at the wrong time to move the centre of their life interests to Wollerau. It could not establish a centre of life in Wollerau on 31 December 2015; as it was on a world tour over New Year's Eve.
