Consideration of Losses Incurred Abroad in the Assessment in Switzerland

Facts

A.A. and B.A., who moved to Switzerland in 2005 and transferred their tax domicile to the canton of Schwyz in 2007, suffered losses totaling CHF 405,805.- in 2006 from two German partnerships. The tax administration of the canton of Schwyz did not allow these losses to be deducted in the 2007 assessment, as foreign losses could only be taken into account in determining the tax rate and loss carryforwards from previous periods could not be considered.

A.A. and B.A. filed a complaint against this assessment. The Federal Court upheld the complaint and remanded the case to the tax administration of the canton of Schwyz for a new assessment.

Considerations

The Federal Court stated that the losses suffered by the complainants in 2006 through their participations in German companies should be taken into account in determining the tax rate in Switzerland or in the canton of Schwyz in the 2007 assessment. This corresponds to the legal situation in the intercantonal context and the principle of taxation according to economic performance.

The Federal Court rejected the argument of the lower court that a consideration of the loss carryforward beyond the year in which the foreign loss was incurred could lead to a double tax…