Zurich real estate gains tax and loss offsetting -
Our trip to the Federal Court is rewarded

Since January 1, 2019, business losses can also be offset against real estate gains in intra-cantonal relationships in the Canton of Zurich (due to an amendment to the law). For previous changes of ownership, an offset of business losses against real estate gains tax was only possible in an intercantonal relationship according to the Federal Supreme Court case law. For the existence of an intercantonal relationship, it is sufficient if the taxable legal entity is taxable in several cantons at the time of the offsetting of losses.

In its judgment 9C_628/2022 of January 31, 2023, the Federal Supreme Court had to rule on another case concerning loss offsets for Zurich real estate gains tax. Although, in our opinion, the case was clearly intercantonal and therefore loss offsetting should have been granted, the Zurich City Tax Office disagreed and did not allow the loss carryforwards to be deducted. To our astonishment, the view of the City of Zurich Tax Office was supported by the Tax Appeals Court. We are pleased and see our recommendation confirmed that we did not accept this decision at the time and that we took the case to the Administrative Court together with our client after an in-depth assessment and weighing of the chances. In our opinion, there was clearly an intercantonal relationship at the time of the change of ownership, which is why the loss offset should have been granted.

Fortunately, the Administrative Court of Zurich allowed the loss to be offset on our appeal. The fact that the tax office of the city of Zurich took the case to the Federal Supreme Court shows that the stakes were obviously high, even in view of similar cases. In the aforementioned decision of January 2023, the Federal Supreme Court finally confirmed the administrative court decision and rejected the arguments of the tax office in the final instance.

It is shown once again that it can pay off to defend one's own tax assessment of a situation, even if the assessment authority and even the first appellate court take a different view.

Although the amendment to the law in the Canton of Zurich has allowed business losses to be offset against property gains in intra-cantonal relationships since January 1, 2019, it is apparent in practice that many aspects have not yet been conclusively regulated in their application. We will be happy to answer any questions you may have in this regard - or to assist you in any appeal proceedings.