Facts
The A. GmbH, a commercial company with its registered office in the Canton of SocRA (originally in W., from 1 July 2022 in U.), is the sole shareholder of the C. GmbH with its registered office in V. The sole managing director of both companies is B., residing in V./SG. The company trades in software and hardware.
The Tax Office of the Canton of St. Gallen initiated a procedure on 22 January 2021 to clarify the tax liability of A. GmbH and requested it to submit a statement and supporting documents. After an exchange of correspondence and an oral discussion, the Tax Office issued a ruling on 17 December 2021 determining that A. GmbH was subject to unlimited tax liability in the Canton of St. Gallen due to the place of actual management being in the Canton of St. Gallen. The appeal decision of the Tax Office dated 13 April 2022 was confirmed by the Administrative Appeals Commission of the Canton of St. Gallen on 3 July 2023. The Administrative Court of the Canton of St. Gallen dismissed the appeal against this decision with its ruling dated 18 December 2023.
A. GmbH filed an appeal in public law matters on 30 January 2024, primarily requesting the annulment of the cantonal decision and a ruling that its principal tax domicile was not located in the Canton of St. Gallen for the tax periods 2017 to 2021. Alternatively, it sought the annulment or reversal of the tax assessment notices issued by the Tax Office of the Canton of SocRA for the same period and a ruling that it was entitled to a refund of Fr. 105,975.65. The Tax Office and the Administrative Court of the Canton of St. Gallen requested the dismissal of the appeal, while the Tax Administration of the Canton of SocRA requested that the appeal be dismissed without costs.
Considerations
The appellant argues that the lower court violated the principles of the distribution of the burden of proof and failed to recognise that the place of actual management was not in the Canton of St. Gallen but in the Canton of SocRA. Under harmonised cantonal tax law (Art. 20 para. 1 SocRA), legal entities are personally affiliated with a canton and subject to unlimited tax liability if they have their registered office or the place of actual management in the canton. The place of actual management is deemed to be where the threads of management converge, where the key corporate decisions are made and where the company has the actual centre of its economic existence. Mere administrative management or the activities of the highest corporate bodies are not sufficient for this purpose; what is decisive is the conduct of the ongoing business operations in line with the company’s purpose.
The distribution of the objective burden of proof is, according to consistent case law, applied mutatis mutandis in accordance with Art. 8 CC. However, the question of the burden of proof only arises if a relevant fact remains unproven despite reasonable efforts by the tax authorities. The appellant does not claim that the lower court assumed that facts were unproven and imposed the legal consequences of the burden of proof on it. Instead, it criticises the lower court’s assessment of the evidence and the indicia. In a first step, the lower court found that there was merely a letterbox domicile in W./SocRA, as the premises were barely used and mail was forwarded. In a second step, the lower court examined where the actual management was located and concluded that the managing and administrative activities were mainly carried out at the managing director’s place of residence in V./SG. This was evidenced by the office infrastructure there, the managing director’s activities for other companies and the processing of mail.
The assessment of the lower court is unobjectionable. While the place of actual management may, in individual cases, be located at the managing director’s place of residence if the assessment of evidence shows that key corporate decisions are predominantly made there, the managing director’s place of residence does not constitute a subsidiary connecting factor for unlimited tax liability. What is decisive is whether key corporate decisions and business operations are predominantly conducted at a specific location. If this cannot be established to the required standard of proof, unlimited tax liability outside the registered office canton does not apply. The lower…