Facts
The [X. AG] , a company with production and trading activities in the construction sector, took over the [Z. AG] with all assets and liabilities as of the reference date of November 30, 2004. The [Z. AG] had ceased production in mid-2002 and sold its business property. The lower court found that the [Z. AG] had already been liquidated at the time of the merger and therefore the offsetting of previous year's losses was excluded.
The [X. AG] filed a complaint with the Federal Court and requested that the judgment of the Administrative Court of the Canton of Zurich be set aside and the taxable net profit for the tax period 2004 be set at CHF 0.--.
Considerations
The Federal Court examined whether the takeover of the losses of the [Z. AG] by the [X. AG] was permissible. It found that the tax succession under Art. 54 para. 3 DFTA includes the takeover of the tax factors of the transferring company by the acquiring company.
The court found that the takeover of the tax factors also includes the offsetting of negative results in the sense of a net amount and that the losses of the transferring company falling within the loss carryforward period are also to be taken into account by the acquiring company.
The court also examined whether there were substantive or business management reasons for the annexation of the [Z. AG] by the [X. AG] and whether abusive conduct…