Current cases on intercantonal and international corporate tax law (2024)

Case 1: Forfeiture in intercantonal double taxation law

1. facts of the case

A AG has its registered office in the Canton of Zug. As the registered office is located in the building of a trust company known for its domicile addresses, the tax authorities of the Canton of Zug inquire with A AG during the assessment procedure whether its actual administration is also located in the Canton of Zug. A AG answers in the affirmative, although it actually only has one domicile address in the canton of Zug. On September 30, 2021, the tax administration of the Canton of Zug assesses A AG for the 2020 Zug cantonal and communal taxes.

Based on a notification, the Zurich cantonal tax office learns on September 30, 2023 that the actual place of administration of A AG is in the canton of Zurich. On February 5, 2024, it assesses A AG for the 2020 Zurich state and municipal taxes.

A AG defends itself against taxation by the Canton of Zurich and unsuccessfully appeals to the Canton of Zurich. Finally, it lodges an appeal in public law matters with the Federal Supreme Court. It demands the elimination of the intercantonal double taxation, primarily by the Canton of Zurich, possibly also by the Canton of Zug.

Questions

• In the proceedings before the Federal Supreme Court, the Canton of Zug claims that A AG has forfeited the right to eliminate double taxation due to its conduct. How is this objection to be assessed?
• Does anything change when high tax amounts are involved?
• Subsidiarily, the tax administration of the Canton of Zug claims before the Federal Supreme Court that the Canton of Zurich has forfeited its right of taxation. How is this argument to be assessed?

Case 2: Société civile immobilière

1. facts of the case

A, domiciled in Zurich, holds all the shares in a Société civile immobilière (SCI). The only asset held by SCI is a vacation property in France used by A with a value of EUR 1 million.

Questions

• What is the current taxation of A's shares in SCI (income and wealth tax)?
• What are the tax consequences of selling the shares in SCI?
• What are the tax consequences if SCI sells the property and distributes the proceeds of the sale as a dividend to A?
• What are the tax consequences if A dies and bequeaths his shares to his niece?

Case 3: Place of actual administration for mobile activities (BGer 9C_133/2023 of June 22, 2023)

1. facts of the case

A AG was founded in 2014 with its registered office in U./ZG. According to the entry in the commercial register, the purpose of the company is the provision of services in the field of information technology (IT), in particular the registration of Internet addresses and domain names.

A-AG has five shareholders, three of whom - B, C (Chairman of the Board of Directors) and D - make up the Board of Directors. All shareholders are only marginally active for the complainant. With the exception of B, all shareholders work mainly for E-Services GmbH in Zurich, which is also owned by two of the shareholders and provides similar services.

The complainant's infrastructure costs in Zug amount to CHF 4,000, which is conspicuously low compared to the premises of E-Services GmbH. In addition, workstations and support tasks were outsourced to E-Services GmbH. The employees of E-Services GmbH have 500 m2 of workspace at their disposal, which is significantly more space than A AG has in Zug.

Furthermore, B and C live close to the complainant's location in Zug, while the other three shareholders all lived in the canton of Zurich.

Board member B carried out administrative tasks and decisions regarding the website and logo in Zug. Various business meals are demonstrably held in the canton of Zug.

Despite requests from the tax authorities, A AG refuses to submit conclusive accounting documents, to substantiate the activities of director C and to provide evidence of D's employment relationship.

For its part, the tax administration of the Canton of Zurich refused to question the president of the appellant's administration.

The Zurich Cantonal Tax Office took the view that A AG had its place of effective administration in Zurich for the years 2015 to 2018. The Administrative Court confirmed this view and also ruled that the AG also had a place of effective administration in Zurich for the year 2019.

Question

• How is the place of actual administration to be determined for the years 2015 to 2019?

Case 4: Place of actual administration for mobile activities (BGer 9C_722/2022 of November 6, 2023) 

1. facts of the case

A GmbH was founded on December 23, 2010 and entered in the commercial register of the Canton of Schwyz with its registered office in U. The share capital amounts to CHF 40,100 and is held by the shareholders B (CHF 20,100) from V. (municipality of W.)/SG and C GmbH (CHF 20,000) with registered office in C (Germany). B is registered as managing director. The company specializes in consulting in the area of conception, organization and implementation of events and festivals, both as an overall contract and in individual areas such as marketing, logistics and catering. It is also active in the field of management consulting and ticket sales as well as in all business related to its purpose. The business activity of buying and selling tickets for major sporting events by the managing director and other freelancers was carried out at various events on site.

In fact, it was determined that there was no geographical focus of business activities. The company's activities at its registered office had no real significance, as it had no infrastructure of its own and, with the exception of the managing director, no staff of its own. The managing director was the only permanent employee of the company and made the main business decisions.

The company had only rented a furnished meeting room for shared use in U. for CHF 4,000/year. According to the corresponding account statement ("rent or lease payments"), the compensation was only paid in 2016. Finally, all correspondence was forwarded to the managing director in the Canton of St. Gallen. However, certain administrative activities actually took place in Schwyz.

Questions

• How is the place of actual administration to be determined for mobile work?
• How should the burden of proof be distributed when it comes to services that are difficult to locate?
• Under what conditions can legally binding assessments be revoked in order to avoid intercantonal double taxation?

Case 5: Power of disposal in the case of a permanent establishment (BGer 9C_647/2022 of June 23, 2023)

1. facts of the case

A AG, domiciled in the Canton of Zug, has been taxed as a mixed company since 2011. With the submission of the 2017 tax return, A AG applied for ordinary taxation subject to the recognition of a permanent establishment in Shanghai (E.).

The contract for the rental of the premises in Shanghai was concluded by the parent company of A AG. The persons employed in the E. office were neither employed by A AG nor organizationally subordinate to it. The site manager (COO) reported directly to the parent company. On the other hand, A. AG assumed the costs in connection with the E. location and its conversion.

The Cantonal Tax Administration of Zug did not recognize the permanent establishment in Shanghai and offset the operating costs of CHF 374,985 attributable to it.

Questions

• When is there a power of disposal if this is not formally given?
• Does treaty law require a portion of the profit to be exempt from taxation if there is no power of disposal?
• Is there a hidden profit distribution if the power of disposal is denied?

Case 6: Quantitatively and qualitatively significant activity of a permanent establishment (BGer 9C_639/2022 of November 22, 2023)

1. facts of the case

A AG has its registered office in the canton of Zurich. Its corporate purpose is the organization of fundraising campaigns. A. AG maintains a permanent office in the canton of Ticino, which comprises a 6-room apartment. In addition, A. AG has also rented ad hoc premises in the canton of Vaud. These consist of business premises on two floors with shop windows, a laundry room and an office. The actual fundraising activities took place on public property in both the canton of Ticino and the canton of Vaud.

With definitive final invoices dated April 7, 2015 (2013), June 6, 2016 (2014) and April 10, 2017 (2015), the Canton of Zurich placed 100 percent of the profit and capital of A. AG under its tax jurisdiction for the tax periods 2013 to 2015.

With final invoices dated September 7, 2017, the Ticino tax administration assumes that A AG is subject to tax by virtue of economic affiliation for the same tax period from 2013 to 2015. This means that the canton of Ticino is subjecting part of the profit of A AG to its tax jurisdiction.

In its final invoice dated September 24, 2018, the Vaud tax authorities determined that A AG was liable to pay tax for the 2015 tax period by virtue of its economic affiliation. The canton of Vaud thus also subjects part of the profit of A. AG to its tax jurisdiction.

A AG is lodging an appeal in public law matters with the Federal Supreme Court. It is essentially requesting that the Ticino and Vaud final accounts be upheld and that the Zurich final accounts for the tax periods 2013 to 2015 be set aside and redetermined. In the alternative, A. AG requests a declaration that A. AG did not have a permanent establishment in either the canton of Ticino or the canton of Vaud in the tax periods 2013 to 2015 (TI) and 2015 (VD), and that the final accounts of both cantons be set aside and the wrongly levied taxes refunded.

Questions

• Has the Canton of Ticino forfeited its right of taxation with regard to the 2013-2015 tax periods?
• Do the head office in the canton of Ticino and the ad-hoc premises in the canton of Vaud fulfill the characteristics of a permanent establishment that gives rise to a tax liability by virtue of economic affiliation?