Appeal proceedings taking into account intercantonal and international aspects (2 parts)

Ruth Bloch-Riemer

Toni Hess

Case 1: Eyes open in the appeal procedure

1. facts of the case

1.1 Initial situation

A is the sole shareholder of the domestic X. AG (operational). He is resident in Zurich. X. AG has its registered office in Zug.

By order dated 23 September 2021, A is required to pay back taxes and penalty taxes in the area of state and municipal taxes of the Canton of Zurich and direct federal tax for the tax periods 2013-2018. The 30-day objection period expired unused. On 5 February 2022, shortly after the pandemic-related home office obligation was converted into a home office recommendation, A submits a request to restore the objection period.

Question

What is the appeal procedure if the assessment authority does not accept the objection?

1.2 Variant 1

A is represented in tax matters by its trustee B.

All correspondence in tax matters is sent to the trustee B; A herself no longer receives any mail from the tax office. The ruling in the post-tax and criminal proceedings was therefore sent to B. B had been in Covid quarantine since August 2021 on the recommendation of the Inselspital Bern, as she belonged to a risk group. For this reason, it had been impossible for her to access the files in a timely manner and to contact the taxpayer A. A transfer of the mandate to another trustee had been impossible for time reasons and due to the complexity of the case. It is requested that the time limit for filing an objection be restored.

Questions

Is the request for restoration of the objection period granted?
B has no longer been responsible for mandate"A" since the end of August 2021 and"withdrew" her power of attorney from the tax authorities in a simple letter in mid-September 2021. Was the notification of the order dated September 23, 2021 valid?

1.3 Variant 2

A did not file tax returns for the tax periods 2015-2017. With regard to direct federal tax, he was imposed an administrative fine by rulings of 2017 (tax period 2015) and 2018 (tax periods 2016) (violation of procedural obligations by not filing the tax return, Art. 174 para. 1 lit. a DBG). A filed an objection against both rulings in September 2019. In a medical certificate dated August 2019 and February 2020, A was classified as 100% incapable of work for the period from September 2016 to August 2019 due to obsessive-compulsive disorder and depression. In November 2018, A filed a timely objection against the discretionary assessment concerning the 2015 tax period. A requests that the deadline be restored.

Question

Is the request for restoration of the time limit granted?

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Case 2: Intercantonal double taxation and procedural issues

1. facts of the case

Mr. and Mrs. AD (hereinafter referred to as AD) moved their place of residence from Zurich to Graubünden at the end of 2017. As a result, they were taxed for the tax periods 2017 to 2020 with their main tax domicile in Graubünden. These assessment rulings became legally binding without being contested. In the canton of ZH, there was a limited tax liability for these tax periods due to ownership of a property.

For the 2021 tax period, they were assessed by the canton of Grisons with assessment rulings dated January 17, 2023. These rulings initially did not become legally binding (for other reasons - the granting of some deductions was still disputed) ; this finally occurred on March 5, 2024 (Graubünden = canton making the first assessment).

In a letter dated April 28, 2023, the tax office of the Canton of Zurich asked Mr. and Mrs. AD to submit documents with regard to the audit of their unlimited tax liability in 2021. They complied with this request in a letter dated May 15, 2023.

On July 12, 2023, the tax office of the Canton of Zurich issued AD with an assessment proposal for the 2021 tax period, stating that the main tax domicile was in Zurich and that Mr. and Mrs. AD would be subject to unlimited tax liability in the Canton of Zurich from the 2021 tax period. In a letter dated July 27, 2023, Mr. and Mrs. AD raised objections to unlimited tax liability in ZH by explaining the different electricity and water consumption.

On February 28, 2024, the tax office of the Canton of Zurich issued the 2021 assessment rulings, which maintained the main tax domicile and unlimited tax liability in the Canton of Zurich. These rulings became legally binding (Zurich = second-assessing canton).

On April 2, 2024, Mr. and Mrs. AD requested the tax administration of the canton of GR to revise the assessment rulings of January 17, 2023 regarding the dir. They justified their request as follows: The canton of ZH had decided that they would have their main tax domicile in ZH from 2021. Furthermore, in the event of double taxation, an application for revision exists even without an explicit reason for revision in the Tax Act.

The canton of GR does not know the institute of audit for intercantonal double taxation conflicts.

Questions

How will the Cantonal Tax Administration Graubünden decide?
How should the AD couple have proceeded in order to avoid double taxation with regard to cantonal and communal taxes? How would the cantonal tax administration have reacted in federal court?
How should the AD couple have proceeded in order to avoid double taxation with regard to direct federal tax?

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Case 3: Intercantonal jurisdiction for direct federal tax (BGE 150 II 244)

1. facts of the case

Mr. and Mrs. AB (hereinafter AB) lived in the Canton of Bern and were subject to unlimited tax liability there. From 2001, A worked at the Federal Office C. From July 1, 2016, he was seconded to Luxembourg for a limited period (two years) to represent Switzerland at Office D. The tax administration of the city of Bern registered AB's departure on June 30, 2016, from which date A was no longer taxed in Switzerland, while B was subject to withholding tax due to her part-time work in Switzerland. The assessment rulings for the 2016 tax year became legally binding.

Mr. and Mrs. AB kept their rented apartment in Bern, which they had rented since 2006. Their two adult sons lived in this apartment on a part-time basis. B also regularly spent the night there (Mondays, Tuesdays and Wednesdays) in order to pursue her part-time work. Whenever possible, B took the train to A's home in Luxembourg on Thursday afternoons and returned to Switzerland on Mondays. She spent the majority of her weekends in Luxembourg, with one weekend in Bern every four to five weeks.

With a view to returning to Switzerland in the future, the couple maintained bank and postal accounts in Switzerland. They also visited their (dental) doctor in Bern. They attended family events in Switzerland every two months. In Luxembourg, however, they also received regular visits from friends from Switzerland.

In 2018, the tax authorities of the Canton of Bern initiated proceedings to clarify the tax domicile of Mr. and Mrs. AB for 2017. In a ruling dated January 14, 2019, it determined that Bern remained the tax domicile of Mr. and Mrs. AB. The appeals lodged against this were unsuccessful and the Administrative Court of the Canton of Bern confirmed the assessment.

Mr. and Mrs. AB lodged an appeal in matters of public law with the Federal Supreme Court, requesting that the ruling of the Administrative Court be set aside and that the Canton of Bern be denied the right of taxation for 2017.