Federal Supreme Court, 23.10.2025, 9C_321/2025
Facts
A.________ AG is a holding company with its registered office in the canton of Zug. Its Chairman of the Board, F., is also employed full-time by an operating subsidiary, E. AG, based in the canton of Zurich. Suspecting that the company's effective management was located in Zurich, the Zurich tax authorities initiated proceedings to determine their tax jurisdiction for the 2016 to 2020 periods. The company refused to cooperate, arguing that it was subject solely to the tax sovereignty of Zug. The Zurich authorities, and subsequently the cantonal judicial bodies, confirmed tax liability in the canton of Zurich. The company appealed to the Federal Supreme Court, requesting the elimination of double taxation by annulling either the Zurich decision or the already final tax assessments from Zug.
Legal Analysis
Under harmonized tax law (Art. 20 para. 1 LHID), a legal entity is subject to unlimited tax liability in the canton where its registered office or its effective management is located. Effective management is the place where essential decisions are made, day-to-day operations are managed, and the company's center of economic activity is situated. The registered office listed in the commercial register creates a presumption. A canton claiming that effective management is located within its territory must prove this with a high degree of probability. The taxpayer has a duty to cooperate in establishing the facts. In the event of a conflict, the prohibition of double taxation (Art. 127 para. 3 of the Constitution) dictates that the taxing right of the canton of effective management takes precedence over that of the canton of the registered office. The right to challenge double taxation can only be forfeited due to contradictory behavior in cases of clear abuse of rights.
Application to the Case
The Federal Supreme Court finds that the Zurich authorities had sufficient grounds to suspect effective management in Zurich, particularly due to the Chairman of the Board's presence at a Zurich subsidiary's premises and the lack of substantial infrastructure in Zug. Faced with the company's refusal to cooperate, and having provided no evidence to the contrary, the lower court was able to conclude, without arbitrariness, that it was highly probable that the holding company's effective management was located in Zurich. Consequently, the tax jurisdiction of the canton of Zurich is confirmed. By virtue of the prohibition of double taxation, the canton of Zug loses its right to tax the company based solely on its registered office. The Federal Supreme Court rejects the argument from the canton of Zug that the company had forfeited its right of appeal through contradictory behavior ("Verwirkungseinrede"), ruling that the company's conduct, while open to criticism, did not constitute a clear abuse of rights justifying the maintenance of double taxation.
Outcome
The Federal Supreme Court dismisses the appeal insofar as it is directed against the canton of Zurich. It upholds the appeal insofar as it concerns the canton of Zug. The final tax assessments of the canton of Zug for the years 2016 to 2019 are annulled, and the taxes collected must be refunded. Due to its lack of cooperation throughout the proceedings, the appellant company is ordered to bear all legal costs.
Silex Tax Newsletter published in collaboration with Anna Vladau, Attorney at Law
