The case

Protection of legitimate expectation and binding effect of tax rulings; benefit-in-kind. In the present case, the respondent cannot (in good faith) rely on information (ruling) of the cantonal tax administration as it was incorrect.

The transaction described in the ruling obviously showed all the characteristics of benefit-in-kind. Since the ruling is not binding, it must be examined how the benefit-in-kind is to be assessed and to what extent it is subject to income tax for the respondent. Remittal of the proceedings to the lower court for the purpose of supplementing the facts and examining the question (over which academic research is divided) of whether the distribution of participations in operating companies must remain tax-neutral as a demerger.

 

Source: ​taxlawblog and ruling of 9 June 2023 (9C_697/2022): State and communal taxes and direct federal tax 2014 (Appenzell Ausserrhoden) in German

The commentary

Because the ruling had obviously made flawed assumptions and, as a consequence, is not correct, and thus not binding. The assessment of the benefit-in-kind at the level of the shareholder does not necessarily have to follow the assessment of the hidden profit distribution at the level of the company, though this could be an indication for the assessment of the shareholder’s tax exposure.

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