Real Estate Capital Gains Tax in the Event of Economic Transfer of Ownership

Facts

The [A. AG] , a general contractor, concluded a purchase agreement with [B. AG] on December 31, 1998, for a property in the municipality of [V.] /ZH. The contract provided for an exercise price of CHF 4'500'000.-- and was limited until May 31, 1999. [A. AG] transferred the purchase right to [C. AG] on April 13, 1999. [C. AG] exercised the purchase right on May 31, 1999, and became the owner of the property.

The municipality of [V.] /ZH assessed [A. AG] for real estate capital gains tax with a tax assessment decision of October 2, 2006, and a decision on appeal of March 10, 2008. The Tax Appeals Commission III of the Canton of Zurich and the Administrative Court of the Canton of Zurich confirmed the assessment.

[A. AG] filed a complaint with the FSCA and requested the annulment of the decision of the Administrative Court of the Canton of Zurich and the remittal of the case to the lower court.

Considerations

The FSCA examined the jurisdiction and the prerequisites for consideration and came to the conclusion that the complaint is admissible. It then examined the statute of limitations for the Canton of Zurich's right to assess and came to the conclusion that the right has not yet expired.

The FSCA also examined the forfeiture of the Canton of Zurich's right to tax and came to the conclusion that forfeiture has not occurred, as the Canton of Zug did not raise a formally valid forfeiture plea.

The FSCA then examined whether an economic transfer of ownership has occurred and came to the conclusion that the lower court has correctly assumed an economic transfer of ownership in accordance with federal law. It also examined whether the…