Zurich property gains tax and loss offsetting - Our appeal to the Federal Supreme 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, it was only possible to offset business losses against real estate gains tax in intercantonal relationships in accordance with federal court rulings. For an intercantonal relationship to exist, it is sufficient for the taxable legal entity to be taxable in several cantons at the time the losses are offset.

In its ruling 9C_628/2022 of January 31, 2023, the Federal Supreme Court had to rule on another case in the area of loss offsetting for Zurich property gains tax. Although, in our opinion, there was clearly an intercantonal situation 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 tax appeals court supported the view of the Zurich tax office. We are pleased and feel vindicated in our recommendation not to have accepted this decision at the time and to have taken the case to the administrative court together with our client after an in-depth assessment and weighing up the chances. In our opinion, there was clearly an intercantonal relationship at the time of the change of ownership, which is why the offsetting of losses should have been granted.

Fortunately, the Zurich Administrative Court allowed the offsetting of losses following our appeal. The fact that the City of Zurich Tax Office took the case all the way to the Federal Supreme Court shows that there was clearly a lot at stake, even when looking at similar cases. In the above-mentioned decision of January 2023, the Federal Supreme Court ultimately confirmed the administrative court's decision and rejected the tax office's arguments in the last instance.

It shows once again that it can pay off to defend your own tax assessment of a situation, even if the assessment authority and even the first instance of appeal take a different view.

Although the amendment to the law in the canton of Zurich since January 1, 2019 means that business losses can also be offset against real estate gains in intra-cantonal relationships, it is clear in practice that many aspects of application have not yet been conclusively regulated. We will be happy to answer any questions you may have in this regard - or assist you with a possible appeal.