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Julia von Ah

Toni Hess

Tax challenges of partnerships


Workshop by Julia von Ah and Toni Hess at the ISIS) seminar on 13/14 June 2022 entitled "Corporate Tax Law 2022".

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Case 1: Cash payment of the termination benefit under pension law as a result of taking up self-employment

1. basic facts

A. had been employed by an insurance company as a financial planner since 2005.

In addition, he has been qualified by the tax authorities as a professional real estate and securities trader since the 2014 tax period. With this
activity, he achieved the following results (amounts in CHF):

On 19 November 2019, A. founded C. AG. The purpose of this public limited company is, among other things, the provision of fiduciary, financial, tax advisory and asset management services as well as business activities in connection with real estate.

On 1 January 2020, A. registered his sole proprietorship "A. Consulting" with the cantonal compensation office and had it entered in the commercial register. He stated that the purpose of his business was to provide pension and financial advice and to trade in real estate.

A. then terminated his employment with the insurance company on 31 January 2020.

On 1 February 2020, the pension fund of the insurance company A. paid out the amount of CHF 491,656-. as a result of taking up self-employment.

On 1 January 2021, A. had the sole proprietorship deleted from the commercial register and employed by C. AG as managing director. In the 2020 tax return, A. declared income from self-employment of CHF 40,018.


  1. What are the requirements for a cash payment of the termination benefit as a result of taking up self-employment?
  2. Are these conditions met in the present case?

Facts variant 1

The cash payment of the termination benefit by the pension fund is accepted by the tax administration and subject to a special tax. On 20 January 2021, A. makes a purchase of CHF 100,000 into the pension fund of C. AG, where he has been employed as a managing director.

Question on the factual variant

What are the tax consequences of this purchase into the pension fund?

Situation variant 2

A. did not exercise any secondary gainful activity as a professional real estate and securities trader prior to the withdrawal of the termination benefit on 1 February 2020. C. AG was established on 15 March 2020, with the cash payment from the pension fund serving to capitalise the company. On 1 April 2020, A. took up employment with C. AG. On 12 December 2020, he made a purchase into the pension fund of C. AG in the amount of CHF 100,000. In the 2020 tax return, A. did not declare any income from self-employment.

Questions on the facts of the case 2

  1. Are the requirements for the cash payment of the termination benefit met under these circumstances?
  2. If the cash payment was wrongly made: What would be the tax consequences?

Facts variant 3

As in case variant 2, with the difference that the tax authority assessed the disputed lump-sum payment with an annual tax pursuant to Art. 22 para. 2 in conjunction with Art. 38 DBG or Art. 11 para. 3 StHG. Art. 38 DBG or Art. 11 para. 3 StHG and this has become legally binding. Subsequently, the tax authority intends to return to this assessment.

Question on the facts of the case 3

Under what conditions can the assessment authority revert to the special assessments, i.e. cancel them?

Case 2: Liquidation profit taxation for heirs with unlimited and limited tax liability

1. facts of the case

X. and his wife Y. (both around 85 years old) reside in the canton of Zurich. X. and Y. are owners of several properties in the cantons of ZH (annual net rental income of around CHF 300,000), SG (annual net rental income of around CHF 200,000) and SH (annual net rental income of around CHF 150,000). The properties qualify as business assets (quasi-real estate trader).

X. and Y. have three children, two sons, R. and S., and a daughter, T. The sons live near their parents in the canton of Zurich. The daughter lives in London (UK).

X. and Y. do not wish to sell their properties, but to bequeath their property to their children.

The children plan to hold the inherited properties for a longer period of time and to continue trading. They would like to know whether they could also claim liquidation gains taxation under Art. 37b DBG and Art. 11 para. 5 StHG in the event of a subsequent sale of the properties. In particular, the daughter T., who is not personally resident in Switzerland and has no intention of moving there, wants to be sure that she can also claim this mitigation as a person with limited tax liability "only" because of the inherited property.


  1. Preliminary question: What mitigation option exists for the three children in principle in the short term after inheritance? Can the three children claim a fictitious purchase? X. and Y. never set up an occupational pension plan.
  2. Assumption: The three children continue to trade in the real estate and hold the real estate for more than 5 years from the date of inheritance.
  3. May the three children and in particular T., who then has limited tax liability, claim liquidation gains taxation under Art. 37b DBG and Art. 11 para. 5 StHG?
  4. May the three children, and especially T., then claim a fictitious purchase into the occupational benefit scheme?

Case 3: Termination of a self-employed construction-related activity in light of Art. 37b DBG

1. facts of the case

X.Z., born in 1958 and resident in F., Canton of Zurich, together with his brother, Y., had been running the general partnership registered in the Commercial Register, Gebr. Z., construction company (KG Gebr. X.+Y.Z.). The general partnership had its registered office on H.-Strasse in the municipality of M. In 1995, it took over the assets and liabilities of the defunct sole proprietorship "V.Z." in K., and was entered in the Commercial Register at that time.

The sole proprietorship "V.Z." had been founded by the deceased father of X. and Y. in the 1960s and had been established with the purpose of purchasing various plots of land in several Zurich municipalities and building apartment buildings on them. The flats in these apartment buildings were rented out by him and maintained on an ongoing basis. In 1995, KG Gebr. X.+Y.Z. took over from the sole proprietorship "V.Z.". 10 apartment buildings with around 100 flats. These properties were located in various municipalities in the Canton of Zurich. After the takeover, KG Gebr. X.+Y.Z. held these properties unchanged in its fixed assets until 2017 and 2018.

According to the entry in the commercial register, the purpose of KG Gebr. X.+Y.Z. was to operate a construction company and to build, rent and sell properties. KG Gebr. X.+Y.Z. was primarily a construction company specialising in the conversion and renovation of residential properties, in particular also for third parties. In addition to X. and Y.Z., it usually employed three full-time employees and a part-time secretary. X.Z. was responsible for the conversion and renovation projects, which he carried out with the employees primarily for third parties, and worked on the construction site. Y.Z. managed the aforementioned properties and headed the administration of the partnership. The limited partnership Gebr. X.+Y.Z. did not build or sell any properties.

In 2016, KG Gebr. X.+Y.Z. received an offer to purchase one property. Due to their age and the lack of a succession solution, X.Z. and Y.Z. accepted this offer in 2017 and used the sale of this property as an opportunity to also sell the other properties of KG Gebr. X.+Y.Z. in 2017 and 2018, to cease the construction company's activities, to dissolve the general partnership and to retire. One property, B.-Strasse in E. (MFH), was acquired by X.Z., the other properties were sold to third parties.

By autumn 2018, all properties of KG Gebr. X.+Y.Z. had been sold and the remaining assets and liabilities liquidated by 31 December 2018. With the sale of the last property at the end of October 2018, the last significant liquidation action was completed. With the liquidation of the remaining assets and liabilities as at 31 December 2018, the liquidation of KG Gebr. X.+Y.Z. was de facto and economically complete as at 31 December 2018. Following the liquidation, KG Gebr. X.+Y.Z. was deleted from the commercial register in January 2019. With the liquidation, X.Z. ended his self-employment as a building contractor and no longer took up any other gainful employment. He was registered with the SVA Zurich as a non-employed person as of 1 January 2019 and thus included by the compensation office.

In his 2017 tax return, X.Z. applies for liquidation gains taxation in accordance with Art. 37b para. 1 DBG. This was not taken into account in the assessment ruling for direct federal tax and the objection raised against it was also unsuccessful.

The Zurich Cantonal Tax Office set the taxable and rate-determining income at CHF 7 million.

Reasons given in the objection decision (summarised).

(i) The self-employed activity is not already abandoned when the obligated person ceases to provide the characteristic business performance. Rather, the last (essential) act of liquidation is decisive. An asset of the business assets retained its quality as a business asset even during liquidation and after the cessation of active gainful activity. It remained a business asset until its sale or realisation.

(ii) In mid-2018, X.Z. purchased the property B.-Strasse in E. from KG Gebr. X.+Y.Z. for CHF 2.3 million. The purchase was financed by a bank mortgage in the amount of CHF 2.9 million. In 2018 and 2019, the property was renovated and converted for around CHF 2 million.

(iii) In the first half of 2019, X.Z. purchased the property H. Strasse in the municipality of M. (former place of business of KG Gebr. X. + Y.Z.) from his brother Y.Z. and also renovated it (reinvestment of profit). According to the revaluation of the GVZ, a value-increasing share of CHF 0.25 million resulted.

(iv) The facts of the present case differed from those that had formed the basis of the VGer ZH of 12 September 2018, SB.2018.00058, concerning the taxation of liquidation profits of a property dealer. In that case, the property trader had been over 80 years old and the court had based its decision on the definitive cessation of trading on his advanced age. X.Z., on the other hand, was only around 60 years old.

(v) With the purchase of the two aforementioned properties, the subsequent renovation/conversion and the letting, X.Z. continued his previous activity in a similar manner. Even if X.Z. no longer worked as a craftsman himself, the property management still remained. X.Z. had not ended his self-employment with the acquisition and conversion of the two properties. It could not be assumed that the self-employed activity would continue on a small scale. Therefore, the privileged liquidation gains taxation pursuant to Article 37b para. 1 of the Federal Tax Act was to be denied.

Further event in 2017 as part of the facts:

In 2017, X.Z. and A.Z. divorced. In the divorce decree, X.Z. was obliged to pay A.Z. post-marital maintenance in the amount of CHF 1,500,000 million in the form of a lump-sum settlement, payable in one or more (also monthly) instalments. X.Z. decided to pay the capital settlement in one lump sum. To do so, he took out a loan of CHF 1,400,000 with KG Gebr. X.+Y.Z. and a loan of CHF 100,000 with Y.Z.. He repaid the loans by the beginning of 2018 with the capital withdrawal from KG Gebr. X.+Y.Z., which was made possible from the sale of the first properties. Due to this civil law obligation, X.Z. was unable to invest the capital withdrawal from the limited partnership Gebr.

In addition, X.Z. was obliged to pay a pension equalisation amounting to CHF 120,000 from the accumulated pension assets in the aforementioned divorce decree. At the time of the dissolution of KG Gebr. X.+Y.Z., his pension fund assets still amounted to CHF 300,000.


  1. According to the cantonal tax office ZH. The acquisition and conversion of the two properties B.-Strasse in E. and H.-Strasse in M. is to be regarded as continued self-employment. X.Z. asks us for our opinion.
  2. The Canton. Tax Office ZH seems to consider the bank financing of the purchase of the property B.-Strasse in E. to be highly leveraged. How should this be assessed?
  3. The Canton. Tax Office ZH qualifies the purchase of the property H.-Strasse in M. as reinvestment of profit. How do you see this?

Case 4: Privileged liquidation profits taxation - private withdrawal

1. basic facts

The spouses A.A. (born 1961) and B.A. (hereinafter: Mr. and Mrs. A.) are resident for tax purposes in Erlen/TG. The husband maintained an agricultural business there as a self-employed (secondary) gainful activity. In 2018 and 2019, he sold the business current assets and part of the agricultural land from his business assets. This led to the realisation of hidden reserves in the amount of CHF 70,000 in the 2018 tax period.

After 2019, he retained ownership of parcels no. X, no. Y and no. Z. These were the self-occupied farmhouse, the outbuildings and the surrounding land amounting to 80 acres.

With the purchase contract of 2 August 2020, A.A. - with the assistance of a property agent who was called in in December 2019 - also sold these three properties, resulting in proceeds totalling CHF 1,330,000. The couple then moved from the farmhouse to their detached house, also located in Erlen, which they had acquired in 2010, subsequently rented to third parties and renovated in November 2019. In the 2019 annual financial statements, A.A. booked the three properties out at market value. In the 2019 tax return, he claimed a private withdrawal in respect of the three properties as at 1 November 2019.

In the 2020 tax return, Mr. and Mrs. A. then no longer declared any business assets.

In the course of the assessment proceedings concerning the 2018 tax period, Mr. and Mrs. A. claimed that the definitive discontinuation of their self-employed activity had taken place on 1 November 2019, which is why the year 2018 should be taken into account as the second last financial year for the taxation of the liquidation gain from the discontinuation of the self-employed activity.

The tax administration of the Canton of Thurgau, on the other hand, took the position that the liquidation was only completed with the sale of the three properties in the 2020 tax period.

Mr. and Mrs. A. claim that they transferred the three parcels of land to their private assets in November 2019. They refer to the derecognition (at market value) and the treatment in the tax returns. In the 2020 tax period, they no longer declared any business assets, which is why the year 2018 is to be assessed as the second last financial year within the meaning of Art. 37b DBG.


It must therefore be examined whether the conditions for privileged liquidation within the meaning of Art. 37b DBG or Art. 11 para. 5 StHG are met.

Specifically, the following questions arise:

  1. What are the requirements for a private withdrawal?
  2. Is the sale of the three properties on 2 August 2020 to be regarded as the last liquidation act of A.A.'s self-employed (secondary) gainful activity or did its discontinuation already occur in the 2019 tax period?
  3. What are the tax consequences for Mr. and Mrs. A. from the assessment of the latter question?

1. facts variant

In its ruling of 5 August 2021 (2C_390/2020), the Federal Supreme Court considered that in case of doubt, the asset should be assumed to remain in the business assets. The decisive factor was not the short holding period as such, but the fact that all indications suggested the pre-existing intention to sell the object immediately after derecognition. The intention to transfer (subjective element) was thus not proven, which precluded the assumption of a private withdrawal despite the undisputed booking (objective element). Consequently, there was no privileged liquidation within the meaning of Art. 37b DBG or Art. 11 para. 5 StHG. The appeal of Mr. and Mrs. A. was therefore dismissed.

Mr. and Mrs. A. submit to the Federal Supreme Court a request for revision of the above-mentioned ruling. They request that a liquidation within the meaning of Art. 37b DBG and Art. 11 para. 5 StHG be assumed for the purposes of the revision. In their application, they invoke Art. 123 para. 2 lit. a FSCA. According to this provision, a revision may be requested if the requesting party subsequently learns of significant facts or discovers decisive evidence that it was unable to produce in the earlier proceedings, excluding facts and evidence that only arose after the decision.

In casu, Mr. and Mrs. A. repeat in their application for revision factual circumstances that were already known to the Federal Supreme Court - and to the lower courts.

Question on the factual variant

How is the appeal to be decided?

Case 5: Private withdrawal of a patent

1. facts of the case

X. is the owner and managing director of C. GmbH, which is active in the field of fine dust filter technology

In April 2020, C. GmbH sold a patent for a fine dust filter it had developed to X for a book value of CHF 18,000. However, the market value of the patent was CHF 1 million.

Subsequently, X. founded E. GmbH with the purpose of managing licences and B. AG with the purpose of manufacturing fine dust filters. X. held these participations as private assets. He continued to be employed by C. GmbH as managing director and earned a salary of CHF 100,000 from this activity in the 2020 tax period. He then registered various amendments to the patent in question and conducted negotiations with various companies with a view to marketing and selling the new type of fine dust filter.

On 1 June 2021, he concluded a licence agreement with E-GmbH.


  1. Will the sale of the patent from C. GmbH to X. in April 2020 result in tax consequences for X.?
  2. How are X's activities after the acquisition of the patent in April 2020 until its sale in June 2021 to be classified for tax purposes?
  3. What are the tax consequences for X. of the sale of the patent to B. AG on 30 June 2021?
  4. What would be the legal position in the event of the sale of the patent in 2021 from X. to B. AG if no hidden profit distribution had been taxed on the sale of the patent from C. GmbH to X. in April 2020?

Case 6: Transactions in cryptocurrency

1. facts of the case

X, a German citizen, moved to Switzerland (Canton of Zurich) on 1 April 2018 and took up employment as managing director of T AG on that date.

As early as autumn 2017, X had created a wallet on a crypto exchange platform (BTC platform, also BTCP) by buying 0.02 Bitcoins (BTC). The equivalent value in Swiss francs at the time was around CHF 130. As an IT specialist, X had written a programme with which he could conduct automated trading in BTC. With this automated trading, BTC were bought and sold several times a day, whereby X made profits and losses.

When X moved to Switzerland on 1 April 2018, the BTC Wallet on the BTC Exchange had a rounded balance of BTC 10.26, which corresponds to an amount equivalent to around CHF 70,000. As at 31 December 2018, the balance was approximately BTC 13.93 (see Appendix 1 Balance 2018), which corresponds to an amount equivalent to approximately CHF 51,600 (BTC rate on 31 December 2018 according to FTA rate list CHF 3,705.37486). The aggregate gains and losses from BTC trading for the period from 1 April 2018 to 31 December 2018 amounted to BTC 3.16 (see Appendix 2 Overview of realised gains and losses 2018). This corresponds to a realised gross income of around CHF 12,600 (conversion BTC/CHF at the daily exchange rate in each case). To make these BTC trades, A had rented an external server (costs in 2018 around CHF 2,000).

In December 2017, X had opened a wallet on another platform (fiat platform). The sole purpose of this wallet is to convert the Bitcoins into fiat currencies (CHF, USD, EUR) to cover living expenses.

As of 25 June 2018, X made a one-time transfer of BTC 0.1 from the wallet on the BTC exchange to the wallet on the fiat platform.

Balance as at 31 December 2018 on the BTC platform around 13.93 BTC (Annex 1). For the 2018 tax year, X declares a taxable net income of CHF 180,000.


  1. Overview Stock 2018 BTC Platform
  2. Overview of realised gains and losses 2018 BTC platform
  3. Overview Stock 2018 Wallet Fiat Platform


  1. How should transactions with BTC on the BTC exchange platform be assessed under tax law?
  2. How are transactions on the Fiat platform to be assessed under tax law?
  3. How should the transfer from the wallet on the BTC exchange to the wallet on the fiat platform be assessed for tax purposes?

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