Rejection of tax exemption for a private limited company that has taken over the municipal electricity supply

Facts

EWD Elektrizitätswerk Davos AG, a private limited company commissioned by the municipality of Landschaft Davos to provide electricity supply, applied for a partial tax exemption on the grounds that it pursues public purposes. The cantonal tax administration and the Administrative Court rejected the application. EWD AG then filed an administrative appeal with the Federal Supreme Court.

Considerations

The Federal Supreme Court dismissed the appeal. It stated that while a tax exemption under Art. 56 let. g of the Federal Act on Direct Federal Taxation (DFTA) and Art. 23 para. 1 let. f of the Federal Act on the Harmonisation of Direct Taxes of Cantons and Municipalities (DTHA) is generally possible if a legal entity pursues public purposes, this was not the case with EWD AG, as its activities are primarily aimed at profit-making and acquisition. Even though the company fulfills a municipal task, the profit-making purpose clearly outweighs the public purpose. A tax exemption is therefore excluded.

The Federal Supreme Court clarified that a tax exemption due to the pursuit of public purposes is generally excluded for a private limited company if it primarily pursues profit-making…