Swiss Federal Supreme Court, 18.12.2025, 9C_349/2025
Facts
A taxpayer residing in the canton of Zurich (U./ZH) operates a self-employed business as a sole proprietorship. For the 2019 tax year, the Zurich tax authorities, contrary to previous years, refused to allocate a portion of his self-employment income to the canton of Schwyz (V./SZ). They determined that the infrastructure used in V./SZ, a "Business Office Center," was too minimal to constitute a genuine place of business.
Successive cantonal authorities (tax office, tax appeals court, and administrative court) upheld this decision, denying the income allocation to the canton of Schwyz while granting the taxpayer deductions for a home office at his private residence in U./ZH. The taxpayer appealed to the Federal Supreme Court, requesting that his self-employment income be attributed entirely to the canton of Schwyz.
Legal Analysis
Under the principles prohibiting intercantonal double taxation and the Federal Act on the Harmonization of Direct Taxes (HATA), an individual is subject to unlimited tax liability at their place of residence and limited liability in another canton where they operate a permanent establishment (Art. 3 and 4 HATA).
A permanent establishment requires the existence of permanent physical facilities where business is conducted. A simple commercial register entry or a formal address is insufficient. If the establishment appears artificial and does not reflect economic reality, the income is fully taxable at the primary place of residence. For decentralized activities (conducted at client sites), the determining place of business is where preparatory and administrative tasks are primarily performed.
Regarding the burden of proof, it is generally the taxpayer's responsibility to prove facts that reduce their tax burden, such as the existence of a special tax domicile. However, if a tax authority challenges a special domicile it has accepted for years, the burden of proof shifts to the authority: it must demonstrate that the conditions for such a domicile are no longer (or never were) met. This reversal only applies if the taxpayer has fulfilled their duty to cooperate.
Finally, the principle of good faith does not prevent a tax authority from changing its practice, as each tax period is assessed independently and previous tax assessments do not bind the authority for the future, absent a formal assurance.
Application to the Case
The Federal Supreme Court first examines the appellant's procedural arguments. It confirms that the Zurich tax authority bore the burden of proving the non-existence of the permanent establishment in V./SZ, as it had accepted it in the past. However, the Federal Supreme Court finds that the authority successfully provided this proof, regardless of whether the appellant had fully met his duty to cooperate. The principle of good faith was not violated, as each tax assessment is independent.
On the merits, the Federal Supreme Court upholds the lower court's assessment of the facts, finding it not to be arbitrary. The following elements demonstrate that the true center of the appellant's activity was his home in U./ZH, not V./SZ:
- Use of residence: The appellant has a functional office at his home in U./ZH, for which he obtained a substantial tax deduction, which presupposes predominant professional use.
- Infrastructure in Schwyz: The establishment in V./SZ is a "Business Office Center" with rudimentary, shared infrastructure (no fixed office, no secure storage, communal facilities).
- Frequency of use: The appellant visited the site only 24 to 30 times per year and did not receive any clients there in 2019.
- Rent: The rent paid was very low and well below market rates, which serves as further evidence of the artificial nature of the establishment.
The Federal Supreme Court concluded that the primary activity, particularly administrative tasks, was conducted from the Zurich residence. The Schwyz location was merely a fictitious address and not a genuine permanent establishment.
Outcome
The Federal Supreme Court dismissed the appeal to the extent that it was admissible. The appellant's self-employment income for 2019 is fully taxable in the canton of Zurich. Legal costs are to be borne by the appellant.
Silex tax newsletter published in collaboration with Anna Vladau, Attorney at Law
