Legal framework - introductory presentation with case studies
Workshop by Patrick Scherrer on the occasion of the ISIS) seminar on 09 November 2021 entitled "Freelance work: tax, social security and pension law aspects".
Case 1: Time of commencement of freelance activity
1. facts of the case
X. has been working as an employed lawyer at a law firm in Zurich since 2015 (entry in the register of lawyers). In 2019, he decides to become self-employed. He terminates his employment relationship with the law firm on 31 December 2019. The business should open on 1 March 2020. X.
In view of the planned opening of the law firm, X. already incurred various expenses and investments in the last quarter of 2019 (development of a logo, creation of a website, printed materials, etc.). X. will deduct the corresponding costs in his 2019 tax return.
Shortly before opening the business, X. receives a partner offer from another law firm in Zurich which he cannot refuse. He renounces the opening of the business and lets himself be employed as a partner by the law firm in 2020.
- Can the expenses incurred with regard to the opening of the business be deducted for tax purposes in 2019?
- Does anything change if X. does not join a law firm but becomes a partner (shareholder) in a general partnership?
- X. had already concluded a tenancy agreement as of 1 March 2020. He found a new tenant as of 1 May 2020. Can X. claim the rental expenses for the months of March and April for tax purposes if he (a) becomes a partner in the law firm or (b) becomes a partner in the general partnership?
Case 2: Advisory mandate/participation qualification
Y. is a business economist (Dr. oec.) residing in the Canton of Schwyz. In the tax period 2020, he ran a sole proprietorship that is active in the field of business consulting. The place of business is in the canton of Zurich.Y. advises a German group (group parent company and subcompanies) as part of his consultancy work. In 2020, this consultancy mandate had already lasted for several years. As early as 2018, the group parent company granted Y. a 5% stake in one of its subsidiaries. At the same time, he was also active as a member of the group's board of directors.
In the tax periods 2018 up to and including 2020, this participation was not capitalised in the books of the sole proprietorship. Nevertheless, income and assets from the participation were taxed in the Canton of Zurich (place of business). However, the Canton of Zurich left the qualification as private or business assets open and, in particular, did not report it to the AHV compensation fund.
In 2020, Y. received funds in the amount of CHF 2 million from the participation. The Canton of Schwyz qualified the participation as private assets and taxed the corresponding investment income. This assessment became legally binding.
The Canton of Zurich, on the other hand, considered the participation as business assets and also taxed the asset income in 2020.
- Why is the qualification of the participation as private or business assets relevant in the present facts?
- Does the fact that the participation was not capitalised in the books of the sole proprietorship have any influence on this qualification?
- After the income and assets from the participation were taxed in the Canton of Zurich in each of the previous periods, can they still be taxed in the Canton of Schwyz?
- Does the participation constitute private or business assets?
- How should the situation be assessed from the perspective of the AHV?
Case 3: Permanent establishment in private residence
1. facts of the case
Z. is a general practitioner. He lives together with his wife in a rented flat in the canton of Aargau. His medical practice for patient treatment is located in the canton of Zurich. In his private flat, he has a special office room at his disposal, in which he conducts his literature and specialist studies in the evenings and at weekends and enters the accounting data of the medical practice for the attention of the trustee. In addition to the rent for the Zurich practice, the pro rata rent for the office in the private rented flat is also recorded in the business accounting.
- Is the canton of Aargau allowed to tax income from medical practice on a pro rata basis?
- Would anything change if Z. were also to treat selected patients in his private flat in a room set up specifically for this purpose?
Case 4: Succession for notary's office/law firm
1. facts of the case
A. is a self-employed lawyer and notary in the canton of Bern. A. has two sons, M. and N. M. is also an admitted lawyer and notary in Bern and already works in his father's sole proprietorship. N. is admitted to the bar in Zurich. A. intends to convert his sole proprietorship into a public limited company and to give his sons a share in it. In future, a branch of the law firm is to be run in Zurich.
- Can such a project be implemented at all from a supervisory perspective?
- What tax issues arise?
Case 5: New business models/platform economy
1. facts of the case
A. AG, with its registered office in Zurich, has the purpose of operating a pharmacy with all associated areas.
In the building of the pharmacy there are several therapy rooms in which medical and other treatments are offered and provided. These treatments are not provided by A. AG, but by independent therapists with whom A. AG has concluded individual rental agreements with. The rent is owed by the therapists even if no clients are being treated. The therapies are paid immediately after the respective treatment. Working hours and scope of work are in principle freely determinable.
The A. AG operates a uniform website for the therapy centre under its own logo for the various treatments. Appointments can be made via this website or in the context of consultations via the pharmacy staff. From A. AG's point of view, the operation of this website is a "shop-in-shop" concept in which it acts as the sole lessor of the treatment rooms.
- How should the income tax and social security situation of therapists be assessed?
- Are the therapy services subject to VAT?
- Who has to account for VAT to the Federal Tax Administration.