Facts
The [X.] Pte. Ltd., a Private Limited Company based in Singapore, operates a branch in [U.] /ZG, Switzerland. The branch keeps its books in US dollars (functional currency) and, for commercial law purposes, converts them into Swiss francs (presentation currency). In 2006, the Singaporean head office of the taxpayer granted a loan of USD 77,811,939.96. The taxpayer recorded an interest expense of USD 3,910,494.41, which it added to the loan debt in its balance sheet.
The tax administration of the canton of Zug determined the taxable profit and taxable equity and dismissed the taxpayer's appeal. The Administrative Court of the canton of Zug rejected the appeal, and the taxpayer appealed to the Federal Court.
Considerations
The Federal Court examines its jurisdiction and the prerequisites for appeal ex officio and with free consideration. The appeal is directed against a decision of the last cantonal instance in a matter of public law, and an appeal in public law matters is admissible.
The Federal Court bases its judgment on the facts established by the lower court. It can only correct or supplement the lower court's findings of fact if they are obviously incorrect or based on a violation of the law within the meaning of Art. 95 FSCA.
The Federal Court addresses the rules on undercapitalization and finds that they are tax law correction provisions that do not have a corresponding commercial law counterpart. The lower…