Facts
The dispute revolves around the admissibility of the lump-sum provisions for repairs and maintenance on around two-thirds of his business properties, which the appellant, a self-employed architect, recorded for the first time in the annual financial statements of his sole proprietorship for the 2014 fiscal year. The provisions were made on a lump-sum basis in the amount of 1% of the building insurance value of the respective property, which resulted in a total provision amount of CHF 490,500.
The Basel-Stadt Tax Administration added these provisions to the assessments for cantonal taxes and direct federal taxes for the 2014 tax period, as it did not consider them to be commercially justified. The appellants argue that the formation of the lump-sum provisions was commercially justified, while the lower court considered the commercial justification of the provisions as not proven.
Considerations
The Federal Court dismisses the appeal. It states that under commercial law regulations, provisions are generally permissible if they were caused by past events, an outflow of funds is probable, and their amount can be reliably estimated. However, according to the tax law provisions, provisions are only recognized as commercially justified in the cases mentioned in Art. 29 para. 1 lit. a and c DBG.
The allowance of provisions for major repairs is generally only justified for tax purposes if the maintenance of the properties has been neglected in the past and this fact has not been taken into account by sufficient depreciation, so that in the future high expenses that cannot or can only be partially capitalized are to be expected due to necessary comprehensive renovation work. If the loss in value has been taken into account by sufficient depreciation, major repairs must be accounted for by corresponding capitalizations.
Even in cases where maintenance has not been neglected, the need may arise in the…