Facts
The complainants, [A.G.] and [B.G.] , lodged a complaint against the decision of the Federal Tax Appeals Commission of the Canton of Zurich, which qualified the dividend paid by [X. AG] in 1998 in the amount of Fr. 425,000.-- as extraordinary income within the meaning of Art. 218 para. 2 and 3 DFTA and subjected it to annual tax.
[X. AG] had achieved and accumulated freely available profits in the financial years 1993/94 to 1996/97 without interruption, without paying out dividends. Only in 1998 was a dividend of Fr. 2,500,000.-- paid out.
The complainants argued that the dividend should not be qualified as extraordinary income, as [X. AG] had not changed its dividend policy and the payment of the dividend was justified for business policy reasons.
Considerations
The Federal Court examined whether the dividend should be qualified as extraordinary income within the meaning of Art. 218 para. 2 and 3 DFTA. It found that [X. AG] had changed its dividend policy in 1998 by paying out a dividend for the first time after not having paid out dividends in previous years.
The court found that the change in [X. AG] 's dividend policy in 1998 constituted an extraordinary income, as it did not correspond to the company's usual dividend policy. It referred to the fact that the company had not paid out dividends in previous years despite having the means to do so, and that the payment of the dividend in 1998 represented a fundamental change in the distribution policy.
The…