Workshop by Susanne Schreiber and Toni Hess on the occasion of the ISIS) seminar on June 3 - 4, 2024 with the title "Tax law challenges of partnerships"
Note: This language version is an automatically generated translation. The text may therefore contain linguistic and terminological errors.
view in original language (German)A. acquired X GmbH together with B. and C. A. used debt financing to purchase the shares that he could not have acquired with his own funds. X GmbH is an asset management and consulting firm, and A. served as its managing director for a short time. Just four months after the acquisition, they sold X GmbH for a hundred times the purchase price. A. invests the proceeds from the sale in a French private equity fund.
A acquired his shares in X GmbH with his own capital and has declared them as part of his private assets since 2010. This was accepted in each tax assessment. Now A intends to gift his shares to his daughter.
A resides in Switzerland and is employed by A. GmbH as a member of the board of directors. As an investment, he has acquired a direct stake in C. GmbH & Co. KG, which is domiciled in Germany.
The business assets of C. GmbH & Co. KG include two parcels of land with several commercial properties in Germany.
A., managing director of Maler AG and Gipser AG, purchased a building leasehold property located on a lake (area: approx. 1,300 m²) in the canton of Schwyz for approximately CHF 4.4 million. By resolution dated February 12, 2015, the municipality granted a building permit for the demolition of the existing single-family home and the construction of a new family home with a granny flat. Subsequently, A. developed the leasehold property. Construction costs amounted to approximately CHF 6 million. On June 16, 2017, A. sold the developed leasehold property to B. AG for CHF 12.4 million. Along with the property, A. also sold a boat for CHF 250,000 as well as furnishings (B&O system, flat-screen TV, whirlpool, etc.) for CHF 250,000.
Prior to the property at issue, A. had acquired three other properties in the same neighborhood and resold them after a short holding period (ranging from 9 months to 2 years and 8 months). He had always occupied these properties as a residence for only a short time before selling them.
A. relied on the proceeds from the sale of two properties to acquire and develop the third one, as well as to finance his luxurious lifestyle.
The cantonal tax administration classified the sale of the developed building right property as commercial real estate trading and the sale of the boat and the remaining movable property as income from self-employment.
A. was unsuccessful both in his objection to the tax authority and in his appeal to the Administrative Court.
In an appeal in matters of public law before the Federal Supreme Court, A. argues that the sold building leasehold property belonged to his private assets and not to his business assets. It was acquired solely for the purpose of moving in with his then-partner and making the property the family home. Furthermore, with regard to the sale of the boat and the furnishings, there was no self-employment activity involved.
A. and B. are married and live in the canton of GR. The husband, A., is employed full-time as a teacher. In addition, he runs a winery. From this, he incurred a loss of CHF 5,000 in 2018. In previous years, profits fluctuated between CHF 2,000 and CHF 11,000. The wife, B., works as a commercial employee on a 90% basis.
A. and B. are co-owners of parcel no. 1 in the wine-growing zone, with an area of approximately 2,200 m². A. and B. purchased this parcel to grow grapes on it. Wife B. is also the sole owner of parcels No. 2 (2,000 m²) and No. 3 (2,500 m²; inherited from her father in 2006 as private assets; gross floor area: 750 m²), which are located in the residential zone. All three parcels are covered with vines.
B. granted her husband A. the use of her parcel No. 3 free of charge for his winery.
B. intended to transfer the right to build on 126 m² (gross floor area) from her parcel No. 3 to her neighbor’s parcel in exchange for consideration. She therefore requested, in a letter dated September 7, 2017, that the competent tax office provide an advance ruling on the tax treatment of this transaction (“tax ruling”). She argued that the proceeds from the transfer of the building rights were subject to real estate gains tax. The tax office replied in a letter dated September 26, 2017, stating that it could not agree with the tax classification proposed by B. and that the compensation was subject to income tax, “even* if the property is part of the private estate*.”
On March 5, 2018, B. transferred a gross usable floor area of 126 m² to the neighboring parcel. As compensation, B. received the amount of CHF 500,000.
Mr. and Mrs. A. and B. continued to believe that the CHF 500,000 would be subject to real estate gains tax (GR: dualistic system).
In its assessment decision dated September 7, 2020, the tax authority classified the CHF 500,000 as income from self-employment subject to AHV contributions for Mrs. B.
After the cantonal appeals filed against this decision were unsuccessful, Mr. and Mrs. A. and B. filed a complaint in public law matters with the Federal Supreme Court. In their complaint, they argue that, in light of its letter dated September 26, 2017, the competent tax office violated the principle of good faith by classifying the CHF 500,000 as income from self-employment. Furthermore, they take the position that the compensation of CHF 500,000 does not constitute income from self-employment because the parcel in question is not part of the business assets, and thus it is subject not to income tax but to real estate gains tax.
A holds several properties in his business assets. All of these properties are rented out. A wishes to sell his properties. Consequently, A sells various parcels in 2020. He sells the remaining three parcels in 2022.
Instead of selling the properties, A. wishes to transfer the real estate held as part of his sole proprietorship into a public limited company (AG).
A.’s real estate generates a high return (net over CHF 2 million per year). Administrative expenses alone amount to CHF 80,000 in the canton of Zurich, which corresponds to at least one full-time position. A. has commissioned a specialized third-party company to handle management, leasing, and collections.
Simona, owner of a painting business, has owned a single-family home for 15 years, which is part of her private assets. For her 60th birthday, she treats herself to something very special by making the following investments in her single-family home:
Simona either uses the electricity generated on her roof herself or stores it. She feeds the remaining electricity into the grid and receives a payment of CHF 8 centimes per kWh.
Christian owns an industrial building in a neighboring municipality. Simona enters into a lease agreement with Christian, whom she knows personally but with whom she has no business relationship. This agreement grants Simona the right to install and operate a PV system on the roof of the industrial building. She sells all the electricity generated by the PV system to the local power utility (PU) at a price of 8 centimes per kWh.
Simona owns an industrial building. This building is part of her business assets. She makes the unused roof space available to a contractor (utility company) for the installation and operation of a PV system (granting of a right of use or conclusion of a binding contract).
Contents of the contracting agreement:
Simona owns an apartment building (MFH) that is part of her personal assets. Her neighbors Christian and Martin also own an apartment building. While Christian holds his apartment building as part of his personal assets, Martin’s apartment building is part of his business assets.
Due to their orientation, the roofs of Simona’s and Christian’s apartment buildings are not suitable for installing a PV system. Martin’s roof, however, is suitable. The three therefore form a so-called self-consumption arrangement (ZEV) and jointly install a larger PV system on the roof of Martin’s apartment building. This system supplies all three apartment buildings with electricity. Only the surplus energy is fed into the grid.
1. What are the tax consequences for Simona, Christian, and Martin?
Simona owns an undeveloped parcel of land that, although located in a building zone, is unsuitable for residential development. The parcel is part of Simona’s private assets. The local utility company wishes to construct a PVA on this parcel. To this end, Simona grants the utility company a building right to the parcel in question, which entitles the utility company to install and operate a PVA (including lines and ancillary facilities) on it for a period of 30 years. The building right is entered in the land register as a parcel of land. The utility company compensates Simona for the building right with an annual ground rent of CHF 120,000.
A. founded a limited liability company (GmbH) with her sister B., which operates in the restaurant industry. A. and B. were each managing partners and, for this purpose, entered into management contracts with the company that provide for a quarterly lump-sum compensation. The contracts stipulate a minimum of 15 hours of work and exclude compensation for overtime.
A. granted a loan to the GmbH. In her tax return, A. voluntarily declared her interest in the company as business assets. The company receives modest flat-rate annual fees ranging from CHF 2,800 to CHF 6,000 from three clients in Italy. The company subsequently goes bankrupt before the loan can be repaid or the flat-rate compensation for the last three years can be paid out.
A. and B. have taken over the real estate of the restaurant business from their father as part of a general partnership and are self-employed. Father V. owns F SA, which grants the two daughters, A. and B., an unsecured loan in the amount of CHF 52 million. The interest rate is 5% per annum and was capitalized annually.
The purpose of the loan is to replace an earlier loan taken out by A. and B. in the same amount, but secured, which was terminated following the onset of the economic crisis in 2008.
A. and B. assert that they can only save their business with the loan from F SA.
Spouses A. and B. hold a 100% stake in the US LLC (C LLC). C LLC holds a third-party-managed securities portfolio. The income is paid out to spouses A. and B. In 2020, A. and B. incur losses from the LLC.
