Military Service Exemption Tax and Taxation of Capital Benefits from Bound Pension Plans

Facts

The complainant [X.] was provisionally assessed for the exemption year 2006 with a military service exemption tax of CHF ________. The taxable income includes special income of CHF ________, which represents a capital benefit from a bound pension plan (pillar 3a). The complainant claimed that this capital benefit should only be taxed at one-fifth of the ordinary rates. The Military, Fire and Civil Protection Office of the Canton of Schwyz and the Administrative Court of the Canton of Schwyz rejected the objection and appeal.

The complainant filed a complaint in public law matters and requested that the capital benefit be taxed only at one-fifth. The Federal Tax Administration requested dismissal of the complaint.

Considerations

The Federal Court examined the admissibility of the complaint and concluded that it is admissible. It found that the military service exemption tax is a financial compensation for the unfulfilled obligation to perform personal service and that its amount is determined by the scope of the primary obligation.

The court discussed the determination of the tax object and concluded that the MSETA refers to the legislation on direct federal tax for the determination of taxable income. It found that the capital benefit from pillar 3a is fully taxed under the law on direct federal tax, but the tax rate is calculated at one-fifth of the ordinary rate pursuant to Art. 38 para. 2 DFTA.

However, the court concluded that the tariff provisions of the DFTA do not apply to the military service exemption tax, as the military service exemption law has its own (proportional) tariff. It…