Tax law challenges for partnerships (2025)

Case 1: Self-employment in relation to the development of intangible assets

1. facts of the case

A. has started to develop an application in collaboration with his colleague C.. The aim of the application is to read the current exchange rates of cryptocurrencies on connected exchanges and to make profits from price differences through simultaneous buy and sell transactions. No profit has yet been made with the application. A. and C. founded D. AG for the purpose of completing and marketing the application. They contributed the application to D. AG as a contribution in kind to pay up the share capital and A. received 250,000 shares in D. AG in return.

Questions

1. Is A.'s self-employment to be affirmed in the present case?
2. If so, did A. make a taxable profit from the contribution in kind to D. AG?
3. If yes: How could A. avoid or reduce the taxable income?

Supplement to the facts:

Inventor A. is interested in physics as a hobby and has also developed a technology for purifying indoor air, which he wants to patent. He has invested private funds at his own risk in his development activities, the organization of which he has determined himself. A license company to be founded, L. AG, is to be the license holder for the use of the patent developed by A.. A. sold 5% of the shares in L. AG, which is yet to be founded, to B. on December 22, 2024 at a price of CHF 12.5 million. The payment from B. to A. was made in 2024. In return, however, B. did not yet receive the shares in L. AG, but 2,500 registered shares in E. AG as collateral, which in terms of value corresponds to an appropriate hedge for the purchase price.

A. has already been a member of the Board of Directors of various companies whose purpose was the development of industrial goods in the energy sector. In addition, he has built up a business relationship with B over a long period of time and has often told him about his development activities.

To date, the shares in L. AG have not been transferred.

Questions

1. How is the payment of CHF 12.5 million to be qualified for tax purposes at A.?
2. To which tax period is the payment to A. to be allocated?

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Case 2: Airbnb - Rental

1. facts of the case

Mr. and Mrs. Castellazzi run the Hotel C. in ZH. They also own rental apartments, which are also located in ZH. These are four multi-room apartments and 27 furnished one-room apartments.

The ZH cantonal tax office assessed the letting of the furnished apartments as self-employment. As the apartments were located on one plot of land, the entire property was to be allocated to the business assets based on the preponderance method.

The canton. ZH tax office assessed Mr. and Mrs. Castellazzi as follows for 2017:

• Taxable income: Canton/commune and dBSt CHF 138,500
• Taxable assets: canton/commune CHF 3,890,000

Following an objection, which was partially upheld, the tax office redetermined the tax factors as follows:

• Taxable income: Canton/commune and dBSt CHF 48,000
• Taxable assets: canton/commune CHF 6,270,000

The Tax Appeal Court partially upheld the appeal and assessed Mr. and Mrs. Castellazzi as follows:

• Taxable income: Canton/commune and dBSt CHF 48,600
• Taxable assets: canton/commune CHF 5,770,100

In their appeal to the Administrative Court, they requested that they be assessed as follows:

• Taxable income: Canton/commune and dBSt CHF 99,200
• Taxable assets: canton/commune CHF 2'470'000.

The Administrative Court did not uphold the appeal insofar as it concerned the dBSt, and dismissed the appeal insofar as it concerned the cantonal and municipal taxes; the letting of the apartments was to be qualified as self-employment. The Administrative Court justified its decision not to intervene by stating that the appellants lacked a current interest worthy of protection with regard to the requested higher assessment. There was no threat of subsequent and tax evasion proceedings.

Mr. and Mrs. Castellazzi lodged an appeal against this in public law matters with the Federal Supreme Court. They argued that the Administrative Court had wrongly refused to hear the appeal regarding the dBSt. With regard to the cantonal and municipal taxes, they argued that the Administrative Court had wrongly classified the letting of the apartments as commercial and not as mere asset management. Furthermore, they requested that the tax factors be set as follows:

• Taxable income: Canton/commune and dBSt CHF 99,200
• Taxable assets: canton/commune CHF 2,580,000

Questions

1. What does the Federal Supreme Court examine with regard to the dBSt? And how does it decide in this regard?
2. With regard to cantonal and communal taxes, was the Administrative Court right to decide that the letting of the apartments qualified as self-employment and therefore dismissed the appeal?

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Case 3: Securities held as business assets

1. facts of the case

A. works as an independent lawyer in the city of D / canton A. His place of residence is in the municipality of V / canton A.

He also holds directorships in various companies, in some of which he also has shareholdings. In 2024, he earned income from self-employment (as a lawyer) and from employment (board mandates). He also receives dividends from shareholdings in C. AG, D. AG, E. AG and F. AG, which are subject to partial taxation.

A. acquired F. AG together with his long-standing business partners L. and M. at a time when the company was in financial difficulties. A. acquired the shareholding in F. AG for a small amount of CHF 6,000. A. was a member of the board of directors of F. AG, granted the company a private loan of CHF 460,000 and provided legal advice. The fee income from activities for F. AG represented around 5.9% of his total turnover.

A. had proceeded in a similar way with regard to the investment in C. AG, i.e. he had initially taken over 30% of the company with his business partners around 10 years earlier as part of a management buyout and saved the company from bankruptcy as Chairman of the Board of Directors. Later, he had again acquired the troubled X. AG, granted substantial loans via C. AG and sold X. AG at a profit after 2 years.

In 2024, A. sold his shares to F. AG at a profit.

Question

• Is the capital gain realized from the sale of the shares in F. AG taxable for A. as income from self-employment?

Continuation of the facts:

With regard to the dividends from C. AG, D. AG and E. AG, A. would like legal certainty that these do not qualify as income from self-employment. Partial taxation is 70% both at federal and cantonal level, regardless of whether they are private assets or business assets.

Within the canton, the current tax rate in the business location city D is 110%, while it is only 87% in the municipality of residence V.

Questions

1. Can A. apply to the court for a declaratory judgment that the shareholdings in question are considered private assets?

1. What would the situation be if the partial taxation of business assets was only 50% compared to 60% (exemption 40%) for private assets?

Continuation of the facts:

At the time of the sale of F. AG, A. assumed that he held the shares as private assets and insisted on a so-called indirect partial liquidation clause in the purchase agreement, according to which the buyer K. AG may not make any harmful distributions after acquiring the investment or must indemnify A..

K. AG would like to make a distribution from F. AG and have it confirmed by means of rulings that this distribution is harmless for the purposes of indirect partial liquidation.

Question

• Will the tax authorities of Canton A grant a ruling confirmation during the ongoing court proceedings on the qualification of the participation in F. AG?

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Case 4: Real estate - only short-term business assets or private assets

1. facts of the case

In 1995, A. acquired several properties in monistic cantons, most of which were managed by a professional real estate management company. A. selected the tenants and coordinated the renovation and conversion work itself.

Until 2015, the properties were declared as private assets of A. and assessed accordingly. In his 2016 tax return, A. declared them as business assets for the first time and the management of the properties as self-employment. A. is 76 years old at this time.

In 2017, he transfers the properties from his business assets to A. AG and applies for deferral of the real estate gains tax based on the restructuring facts (analogous to Art. 12 para. 4 sentence 2 lit. a, 8 para. 3 lit. b StHG).

Question

• Can A. claim the tax deferral?

Facts variant

Since 2007, A. has run a sole proprietorship with the purpose of buying, selling and letting real estate.

Upon reaching normal retirement age in August 2020, he derecognized the last remaining property (co-ownership share) from the sole proprietorship's accounts following the liquidation of his sole proprietorship and declared it as part of his private assets in his tax return. The sole proprietorship posted a profit from the transfer of the co-ownership share in 2020 and was deleted from the commercial register in the same year.

In 2021, he sold the property together with the other co-owners at a profit.

Question

• Did A. transfer the property from his business assets to his private assets or did it remain in his business assets until it was sold in 2021?

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Case 5: Business assets - private assets Qualification/ link to previous tax periods

1. facts of the case

Alexander Casanova lives in the canton of Thurgau and runs a fiduciary office in the legal form of a sole proprietorship.

In 2009 and 2010, he granted his father loans totaling CHF 550,000 from the operating funds of his sole proprietorship so that his father could pay the back taxes and penalties for 2005 and 2006. Casanova accounted for the loans as business assets in each case.

The cantonal tax authorities examined the accounts for the 2009 and 2010 tax years in detail. It did not object to the qualification of the loan as business assets. Furthermore, it assessed the sole proprietorship for the tax years 2009 to 2014 in accordance with the tax returns submitted.

The father died in 2015. He left his two sons Alexander and Claudio Casanova as his heirs. The estate contained assets of CHF 350,000 and liabilities of CHF 550,000 (debt to Alexander). This left Alexander with a net claim of CHF 200,000 against the estate. Claudio Casanova disclaimed the inheritance in due time (see Art. 566 ff. ZGB).

On the grounds that the loan proved to be partially uncollectible due to the death of the father, the remaining claim of CHF 200,000 was written off through profit or loss in 2015.

As part of the assessment for the 2015 tax period, the tax authorities of the canton of TG came to the conclusion that the loan did not serve Casanova's business activities. It was not of a business nature. Rather, it had been granted on the basis of the family relationship so that the father could settle tax debts. The write-off was therefore not business-related.

On the other hand, the tax authorities stated that the death of the borrower had brought about a significant change that justified reclassifying the loan as private assets in the context of the inheritance - despite the fact that it had been recognized as business assets for many years.

It therefore offset the remaining loan amount of CHF 200,000 in the 2015 assessment decision. 

Casanova defended himself against this. The objection, appeal and complaint were rejected.

Casanova lodged an appeal against the Administrative Court's decision in matters of public law with the Federal Supreme Court.

Questions

1. What criteria are used to classify an asset as a business asset?
2. What significance do assessments made in previous tax periods have for subsequent assessments?
3. Specifically: Is Alexander Casanova's loan to be classified as business assets or as Casanova's private assets | Is it significant that the tax authorities accepted the declaration of the loan as business assets for years?
4. Is the write-off of the loan justified on business grounds after the lender's brother has renounced the inheritance?
5. What would the legal situation be if Alexander Casanova had also renounced the inheritance?

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Case 6: Top athletes: Self-employment and sports companies/expatriation abroad

1. facts of the case

A is a snowboarder and runs the sole proprietorship RS Rico Schuler based in St. Moritz. The company has two business areas:

• Rico Schuler's activities as an athlete, including participation in the various snowboard races.
• Marketing the RS Rico Schuler brand. This is driven in particular by posts such as videos, stories and images on various social media channels^.01 This area also includes promotional and advertising assignments as well as public appearances for sponsors. Rico Schuler is also used as a brand ambassador by various brands. The services associated with the marketing of the Rico Schuler brand and the various advertising contracts are governed by various marketing and sponsorship agreements. There are also contracts for the production of advertising films.

In addition to these main areas of business, the sole proprietorship also runs an online store selling Rico Schuler merchandise.

The sole proprietorship is the owner of the word and figurative mark RS Rico Schuler. In order to be able to market the business with this brand even better, it is to be separated from the sports division as an independent business unit.

The following result is planned:

• A new Swiss company, Schuler GmbH, is founded. In future, this company will be responsible for the further development, maintenance and marketing of the RS Rico Schuler brand, the production of films and the online store. The staff required for the further development and maintenance of the brand will be employed by Schuler GmbH. It should be noted that the "Rico Schuler" brand has become detached from Rico Schuler's sporting activities. Today, the brand image is almost exclusively characterized by Rico Schuler's social media presence. It is not the competitive athlete Rico Schuler who is presented here, but the "elegant" acrobat.
• The purely sporting activities, i.e. the competitions, remain in the sole proprietorship of RS Rico Schuler.

The two divisions do not have any substantial assets. Therefore, in addition to trademark rights, contracts are primarily transferred or new ones concluded.

The procedure:

A multi-stage restructuring process is planned for the transfer of the division:

• In a first step, Schuler GmbH is to be founded by means of a cash incorporation. The share capital amounts to CHF 20,000 and Rico Schuler will be the shareholder and managing director of the new company.
• In a second step, the brand, all contracts relating to the marketing of the brand and the inline store will be transferred to Schuler GmbH. The transfers are made at book value. Under civil law, the transfer is carried out as a transfer of assets. The transfer will take place retroactively as of January 1, 2025.

After the foundation, the current employee of the sole proprietorship is employed by Schuler GmbH.

Because Rico Schuler will also be spending a large part of his working time on social media posts, sponsoring events and appearances as a brand ambassador for Schuler GmbH, he will be employed by the company for these assignments. He will receive an annual salary of CHF 100,000 for these activities.

Questions

1. Are the participation rights in Schuler GmbH to be allocated to his private assets
   or to the business assets of his sole proprietorship?
2. Can the transfer of the brand, the contracts and the online store from the sole proprietorship to Schuler GmbH be carried out without affecting profit or loss?

Factual variant:

Rico Schuler is a successful ski racer. As such, he competes in races at home and abroad. He now founds a sports company, Schuler GmbH. Both Rico Schuler and Schuler GmbH A are subject to unlimited tax liability in the canton of Berne.  

The entry and prize money as well as the payments from his sponsors domiciled in Switzerland flow into Schuler GmbH. Rico Schuler is employed by his company. He receives a salary for his services. He also receives dividends from his limited company.

Rico Schuler was particularly successful in Austria, winning various races. The starting and prize money totaled CHF 80,000, which was taxed at source in Austria. After deduction of withholding tax, CHF 64,000 remains, which will be transferred by the Austrian organizer to Schuler GmbH in Switzerland.

Schuler GmbH transfers the entry and prize money earned in Austria and subject to withholding tax to Austria. Only the net amount of CHF 64,000 is recorded in its accounts.

With regard to the salary and dividend payments from Schuler GmbH to Rico Schuler, his tax representative is of the opinion that these should be exempt from taxation in Switzerland subject to progression to the extent that they are attributable to the sales subject to (Austrian) withholding tax.

Questions

1. Is Austria even entitled to tax the entry and prize money on the basis of the DTA CH-A?
2. Has Schuler GmbH correctly booked the foreign entry and prize money and exited to Austria?
3. What do you think about the opinion of Rico Schuler's tax representative and how should salary and dividend payments be taxed in Switzerland, in full or only in part?

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⁰¹ Rico Schuler has over 2 million followers on his social media accounts.

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Case 7: Business assets - car of a doctor

1. facts of the case

B. is a self-employed doctor. He has a practice in X and also visits patients in clinics. He is also active in research at the ETH.

B. is of the opinion that he uses his car professionally for journeys from his home to the practice as well as occasionally for patient visits and journeys to clinics and ETH. He therefore claims depreciation on his car of 20% p.a. in his tax return as part of his self-employment.

Of the total car journeys of 13,000 km, 11,000 km are between home and the practice / place of work.

Questions

1. Can B. claim the depreciation for tax purposes?
2. If not, can he at least claim a travel expense deduction?