Workshop by René Matteotti and Philipp Betschart on the occasion of the ISIS) seminar on June 3 - 4, 2024 entitled "Current cases on intercantonal and international corporate tax law"
Note: This language version is an automatically generated translation. The text may therefore contain linguistic and terminological errors.
view in original language (German)A AG has its registered office in the Canton of Zug. Since the registered office is located in the building of a trust company known for providing domicile addresses, the tax administration of the Canton of Zug inquires of A AG during the assessment procedure whether its actual management is also located in the Canton of Zug. A AG confirms this, even though it actually only has a registered 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 municipal taxes.
Based on a report, the Zurich Cantonal Tax Office learns on September 30, 2023, that the place of actual management of A AG is located in the Canton of Zurich. On February 5, 2024, it assesses A AG for Zurich state and municipal taxes for 2020.
A AG challenges the taxation by the Canton of Zurich and unsuccessfully exhausts the appeals process in the Canton of Zurich. Finally, it files a complaint in matters of public law with the Federal Supreme Court. It seeks the elimination of intercantonal double taxation, primarily by the Canton of Zurich, and alternatively by the Canton of Zug.
A, a resident of Zurich, holds all shares in a Société civile immobilière (SCI). The SCI’s sole asset is a vacation property in France used by A, valued at 1 million euros.
A AG was founded in 2014 with its registered office in U./ZG. According to the entry in the Commercial Register, the company’s purpose is to provide services in the field of information technology (IT), in particular the registration of Internet addresses or domain names.
A AG has five shareholders, three of whom—B, C (Chairwoman of the Board of Directors), and D—serve on the Board of Directors. All shareholders perform only minor work for the appellant. With the exception of B, all shareholders work primarily 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 strikingly low compared to the premises of E-Services GmbH. Furthermore, workstations and support tasks have been outsourced to E-Services GmbH. Employees of E-Services GmbH have access to 500 m² of workspace, which is significantly more space than A AG has in Zug.
Furthermore, B and C live near the complainant’s location in Zug, while the other three shareholders all lived in the canton of Zurich.
Board member B performed administrative tasks and made decisions regarding the website and logo in Zug. Various business lunches have demonstrably taken place in the canton of Zug.
Despite requests from the tax authorities, A AG refuses to submit conclusive accounting documents, to substantiate the activities of Board Member 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 complainant’s chairperson.
The Cantonal Tax Office of Zurich takes the position that A AG had its place of effective management in Zurich for the years 2015 through 2018. The Administrative Court confirmed this view and further ruled that the company also maintained a place of effective management in Zurich for the year 2019.
On December 23, 2010, A GmbH was founded 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 its registered office in C (Germany). B is registered as the managing director. The company specializes in consulting services related to the conception, organization, and execution of events and festivals, both as comprehensive contracts and in specific areas such as marketing, logistics, and catering. It is also active in management consulting and ticket sales, as well as in all business activities related to its purpose. Business activities involving the purchase and sale of tickets for major sporting events by the managing director and other freelancers were carried out on-site at various events.
In practical terms, it was determined that there was no geographical focus to the business activities. The company’s activities at its registered office were of 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 company’s only permanent employee and made the key business decisions.
The company had merely rented a furnished meeting room for shared use in U. for CHF 4,000 per year. According to the corresponding bank statement (“rent or lease payments”), the payment was made only in 2016. Finally, all correspondence was forwarded to the managing director in the canton of St. Gallen. Certain administrative activities, however, did in fact take place in Schwyz.
A AG, headquartered in the Canton of Zug, had been taxed as a mixed company since 2011. Upon filing its 2017 tax return, A AG applied for ordinary taxation subject to the recognition of a permanent establishment in Shanghai (E.).
The lease agreement for the premises in Shanghai was concluded by the parent company of A AG. The individuals employed at the E. office were neither employed by A AG nor organizationally subordinate to it. The site manager (COO) reported directly to the parent company. However, A AG bore the costs associated with the E. site and its renovation.
The Zug Cantonal Tax Administration did not recognize the permanent establishment in Shanghai and added the operating costs attributable to it, amounting to CHF 374,985.
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 consists of a 6-room apartment. In addition, A AG has rented ad hoc premises in the canton of Vaud. These consist of business premises on two floors with display windows, a washroom, and an office. The actual fundraising activities took place on public property in both the canton of Ticino and the canton of Vaud.
Based on final tax assessments dated April 7, 2015 (2013), June 6, 2016 (2014), and April 10, 2017 (2015), the Canton of Zurich subjects 100 percent of the profits and capital of A. AG to its tax jurisdiction for the tax periods 2013 through 2015.
With final tax assessments dated September 7, 2017, the Ticino Tax Administration assumes that A AG is liable for tax for the same tax period from 2013 to 2015 by virtue of economic affiliation. Thus, the Canton of Ticino subjects a portion of A AG’s profits to its tax jurisdiction.
In a final tax assessment dated September 24, 2018, the Vaud Tax Administration determined that A AG was liable for tax for the 2015 tax period by virtue of economic affiliation. The Canton of Vaud thus also subjects a portion of A AG’s profits to its tax jurisdiction.
A AG files an appeal in matters of public law with the Federal Supreme Court. It essentially requests that the final tax assessments from Ticino and Vaud be upheld and that the final tax assessments from Zurich for the tax periods 2013 through 2015 be set aside and reassessed. 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 during the tax periods 2013 to 2015 (TI) and 2015 (VD), and the annulment of the final tax assessments of both cantons with a refund of the taxes wrongfully levied.
