Facts
The [X.] Holding AG, a Swiss company, lodged an appeal against the judgment of the Administrative Court of the Canton of Zurich of 21 September 2011, which concerned its assessment for direct federal tax for the years 2003 and 2004. The appellant claimed that the lower court had wrongly assumed a hidden profit distribution and calculated the participation deduction too low.
The [X.] Holding AG was a shareholder of [Y. AG] , a German company. In 2003, [X. GmbH] , a subsidiary of [X.] Holding AG, sold shares of [Y. AG] to a US investor. The purchase price also included the claim to the dividend for the year 2003. The [X.] Holding AG received a dividend from [Y. AG] , which it claimed as income from participation.
The Federal Court had to decide whether the lower court had rightly assumed a hidden profit distribution and calculated the participation deduction too low.
Considerations
The Federal Court examined the question of whether the lower court had rightly assumed a hidden profit distribution. It found that [X. GmbH] had waived the additional purchase price when selling the shares to its group companies, which would have been incurred in a direct sale to the US investor. This constituted a monetary benefit that was to be qualified as a hidden profit distribution.
The Federal Court further examined whether the lower court had calculated the participation deduction too low. It found that the appellant had not proven that the lower court had obviously incorrectly established the facts. The Federal Court was therefore bound by these findings.
The Federal Court finally…