Dismissal of the appeal regarding direct federal tax and cantonal and communal taxes

Facts

The appellants A. and [B.C.] , both resident in Switzerland, are involved with [X. GmbH] & Co KG (hereinafter [X.] ), a German company with its seat in Germany, whose purpose is the management of its own assets and holdings. [X.] is 50% involved in [Y. GmbH] and [Z. GmbH] , both of which are operationally active in Germany. The appellants declared taxable income and assets in their 2008 tax return, which was estimated and corrected by the cantonal tax authority. The appellants lodged an objection, which was partially approved. Against the decision of the cantonal tax authority, the appellants filed a complaint, which was partially approved by the Tax Appeals Court. The appellants then appealed to the Administrative Court of the Canton of Zurich, which dismissed their appeal. The appellants subsequently filed a complaint with the Federal Court.

The appellants request that the judgment of the Administrative Court of the Canton of Zurich be set aside and that the income and assets of [X.] be fully allocated to Germany. They are of the opinion that [X.] , as a limited partnership managed in a commercial manner, is to be qualified as a business operation pursuant to Art. 6 para. 1 DFTA and that the income and assets of [X.] are not to be allocated to Germany under internal Swiss law, but are to be taxed proportionally by the appellants in Switzerland as income.

Considerations

The Federal Court has admitted the appeal in public law matters and examines whether the lower court has violated federal law. The appellants are of the opinion that [X.] , as a limited partnership managed in a commercial manner, is to be qualified as a business operation pursuant to Art. 6 para. 1 DFTA. However, the Federal Court assumes that [X.] is to be qualified as an asset management company, as it does not engage in commercial activity and does not have fixed business establishments in Germany.

The Federal Court also examines whether the Double Taxation Agreement between Switzerland and Germany (DTA-D) prevents taxation. It finds that [X.] , as a partnership, is…