Current cases on intercantonal and international corporate tax law (2025)

René Matteotti

Philipp Betschart

Case 1: Inter-cantonal aspects of direct federal tax

1. facts of the case

In the 2020 tax period, A AG had its registered office in the canton of Zug. The actual administration was located in the canton of Zurich. This resulted in the following rulings and procedural acts:

October 2021: Final assessment of Zug cantonal and municipal taxes and direct federal tax by the tax administration of the Canton of Zug, assuming unlimited tax liability in the Canton of Zug.

May 2022: Definitive assessment of Zurich state and municipal taxes and definitive assessment of direct federal tax by the Zurich cantonal tax office, assuming unlimited tax liability in the canton of Zurich.

June 2022: A AG lodges an objection in due form and time against the two rulings of the Zurich cantonal tax office.

August 2022: Suspension of the objection proceedings regarding direct federal tax and rejection of the objection regarding state and municipal taxes by the Zurich cantonal tax office.

September 2022-April 2024: A AG goes through the appeals process regarding cantonal and municipal taxes. In June 2024, the Federal Supreme Court rules in the last instance that the actual administration of A AG was located in the canton of Zurich in 2020. The intercantonal double taxation is not eliminated, as A AG had behaved inconsistently or abused the law.

August 2024: The Zurich cantonal tax office requests the FTA to determine the place of assessment for direct federal tax in accordance with Art. 108 DBG.

Questions

Which canton is responsible for the assessment of direct federal tax?
Is the assessment decision of the incompetent canton contestable or void? What are the consequences?
How should the direct federal tax paid to the incompetent canton be dealt with?
As part of the proceedings pursuant to Art. 108 DBG, the tax administration of the Canton of Zug asserts the defense of forfeiture against A AG. Has A AG forfeited its claim to the determination of the place of assessment or to the annulment of the assessment decision of the incompetent canton?

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Case 2: Standard of proof at the place of actual administration

1. facts of the case

A AG relocated its registered office from the canton of St. Gallen to the canton of Appenzell Ausserrhoden on September 22, 2008. Its purpose is to trade in, import and export cosmetic products.

At its new headquarters, A AG only had an office space of 13 m2 as part of a co-working workplace (rent of CHF 300 per month, including ancillary and infrastructure costs).

In contrast, A AG retained the premises it had rented in the canton of St. Gallen since 2004 (100 m2 with three offices and an exhibition and storage room).

As part of tax sovereignty proceedings, the tax office of the Canton of St. Gallen comes to the conclusion that it is very likely that the place of actual administration was still located in the Canton of St. Gallen. It therefore decrees that A AG has unlimited tax liability in the canton of St. Gallen.

After A AG's appeals were all rejected at cantonal level, A AG lodged an appeal with the Federal Supreme Court against the Canton of St. Gallen (main application) and the Canton of Appenzell Ausserrhoden (contingent application).

Questions

Is the overwhelming probability established by the Canton of St. Gallen that the place of effective administration is located in the canton sufficient? What rules apply with regard to the burden of proof, the burden of proof and the standard of proof in general and with regard to the place of effective administration?
In its tax return, A AG has stated that it has no branches, business operations, permanent establishments or real estate outside the canton of Appenzell Ausserrhoden. As the canton of Appenzell Ausserrhoden has already settled the taxes collected by A AG within the framework of the National Fiscal Equalization (NFA) and no correction is possible there, it claims that A AG has forfeited its right to the elimination of double taxation. Will he succeed with this application?
What are the consequences with regard to court costs and party compensation?

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Case 3: Requirement of complete transfer of debt (interest) vs. prohibition of deterioration

1. facts of the case

Z, domiciled in the canton of Zurich, holds land in the canton of Thurgau in addition to his securities portfolio, which is leased and used for agriculture and forestry. The canton of Thurgau values these properties at a market value of CHF 1,000,000 (as they are not subject to agricultural land law). Both the Canton of Zurich and the Canton of Thurgau make the following property tax distinction:

This results in taxable assets of CHF 2,250,000 (at the rate of CHF 3,000,000) in the Canton of Zurich.

If the Thurgau properties were located in the Canton of Zurich, they would be valued by the Canton of Zurich at an income value of CHF 100,000 (as they are actually used for agriculture or forestry). Z therefore lodges an objection against the assessment decision of the Canton of Zurich and asserts the following tax distinction:

This would result in taxable assets of CHF 2,032,000 in the canton of Zurich (at the rate of CHF 2,100,000).

Question

Z bases his objection on the prohibition of discrimination. He claims that, based on the Federal Supreme Court case law on intercantonal double taxation, he is entitled to have the Canton of Zurich value the Thurgau properties in the same way as if they were located in the Canton of Zurich. Rightly so?

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Case 4: Refund of withholding tax and right of use

1. facts of the case

The Danish organization A., a non-profit credit company, purchased several tranches of a Swiss government bond with a total value of CHF 10 million in 2023. The bond had a fixed interest rate of 3%, which resulted in annual interest income of CHF 300,000. Swiss withholding tax of 35% was paid on this interest, which corresponds to a tax burden of CHF 105,000 per year.

In order to minimize the currency risk of the bond, A. concluded a so-called cross-currency rate swap (swap) with an investment bank.

Under the swap, A. received from the investment bank an amount in CHF corresponding to the nominal value of the tranche of the federal bond in Swiss francs ("notional") plus a premium payment corresponding to the difference between the nominal value of the acquired tranche and its market value plus accrued interest. A. had to pay interest on the amount in Swiss francs at the same rate that it received on the corresponding federal bond. In return, A. paid the investment bank the equivalent of the nominal value of the relevant bond tranche in U.S. dollars (USD) at the beginning of the term of the swap and received the variable USD-Libor interest rate plus a "spread" on this amount.

The Federal Supreme Court found on the facts that the swap agreement did not contain any indications of a payment obligation linked to the actual inflow of interest. Rather, A. would have been contractually obliged to pay the swap counterparty even if the interest payments had not been made in full or in part. Based on the double taxation agreement concluded between Switzerland and Denmark, A. applied for a refund of the withholding tax in the amount of CHF 105,000, which was paid to the FTA on the interest payments from the federal bond.

Question

Is A now entitled to a refund of the withholding tax under the DTA CH-DK?

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Case 5: Cost-plus method

1. facts of the case

Wasserkraftwerke A. AG (hereinafter referred to as A) produces electricity and supplies it to its partner companies. These compensated the hydropower plants according to the so-called dividend model. A carried out a control calculation in order to substantiate compliance with the arm's length principle. The cost basis was based on the operating costs. It used 5% for the cost mark-up. Income taxes were not taken into account.

The tax administration, on the other hand, took the view that imputed interest on the equity capital should also be taken into account. The cost mark-up must also amount to 10%. The tax authorities also waived the inclusion of profit tax in the cost base. As the price paid on the basis of the dividend model was lower than that resulting from the control calculation, the tax authorities added the profit tax to A's tax base.