Taxation of investment income and real estate income of an intercantonal company

Facts

Company X., headquartered in the canton of Neuchâtel, is a member of Federation X. whose headquarters are in Zurich. The Federation owns two investment properties located in the canton of Neuchâtel, which it primarily leases to Company X.

For the 2004 tax period, the Federation reported a total profit of 56,094,915 francs and investment income of 75,327,127 francs. In the canton of Zurich, it benefited from a 134.285% participation reduction, reducing the net profit tax to zero. However, the canton of Neuchâtel imposed a real estate income tax of 2,470,000 francs, resulting in a total cantonal and municipal tax of 494,000 francs.

Considerations

The Federal Tribunal upheld the Federation's appeal, considering that the taxation by the canton of Neuchâtel constitutes discriminatory taxation contrary to the prohibition of intercantonal double taxation under Article 127 paragraph 3 of the Federal Constitution.

Indeed, if the Federation's headquarters were located in the canton of Neuchâtel, the taxable net profit would amount to 58,564,915 francs and the participation reduction would exceed 126%, reducing the cantonal tax to zero. Thus, the fact that the…