Facts

The Foundation A. (Foundation 1) and the C. Foundation (Foundation 2) were foundations with registered offices in Basel-Stadt, which operated within the framework of two employee share participation programmes of a group. Foundation 1 was established in 1989 and aimed to facilitate the acquisition of shares by employees as well as contributions to the pension fund of Group B. Foundation 2 (established in 2000) had similar objectives and was merged into Foundation 1 in 2024.

The foundations were involved in the tax periods 2011 to 2016 in two employee share participation plans:

  • Employee share participation plan: Employees annually acquired discounted registered shares in B. Holding AG, which were purchased by Foundation 1 on the stock exchange and sold to the entitled beneficiaries. The shares were subject to a three-year lock-up period.
  • Share participation plan: Management employees acquired discounted shares with a three-year lock-up period. Foundation 2 wrote put options and acquired call options, with both options exercisable after the lock-up period expired. The transactions were structured as "zero-cost transactions", in which the option premiums were offset.

The Swiss Federal Tax Administration (SFTA) conducted a review in 2016 and qualified the foundations as intermediaries pursuant to Art. 13 para. 3 lit. b no. 2 StA. It assessed turnover taxes of CHF 131,118.35 (Foundation 1) and CHF 100,687.85 (Foundation 2). The foundations paid the amounts under protest and filed appeals. The SFTA confirmed the tax liability in the appeal decisions of 26 January 2021 and added that the foundations could alternatively be qualified as dealers pursuant to Art. 13 para. 3 lit. b no. 1 StA.

The foundations filed an appeal with the Federal Administrative Court, which dismissed the appeals with judgment A-865/2021 of 1 December 2023. The foundations then filed an appeal in public law matters with the Federal Supreme Court and requested a ruling that they were not professional dealers, as well as a refund of the amounts paid. The SFTA requested that the appeal be dismissed.

Considerations

The Federal Supreme Court first examined the admissibility of the foundations' applications and objections. It found that the main applications of the foundations for the annulment of the contested judgment and the refund of the paid amounts were admissible, while the declaratory applications were partially inadmissible due to a lack of legal interest in the relief sought. The foundations' subsidiary applications were deemed redundant, as they were covered by the reformatory nature of the Federal Supreme Court proceedings. The SFTA was permitted to expand its arguments in the appeal proceedings without altering the subject matter of the dispute, since the lower court had comprehensively examined the issue of tax liability.

The Federal Supreme Court then addressed the functional jurisdiction of the SFTA and the Federal Administrative Court. In the appeal proceedings, the SFTA had expanded the subject matter of the dispute by alternatively qualifying the foundations as dealers. Although the foundations should have raised this procedural defect at an early stage, they did so only in the Federal Supreme Court proceedings. The Federal Supreme Court held that the objection of lack of functional jurisdiction was forfeited, as the foundations had the opportunity to raise the defect already in the appeal proceedings. The SFTA did not exceed its jurisdiction in a manner that would have led to the nullity of the appeal decisions.

In substance, the Federal Supreme Court examined whether the foundations qualified as securities dealers pursuant to Art. 13 para. 3 lit. b StA. It interpreted the concepts of dealer and intermediary according to the wording, systematic context and legislative history. A dealer pursuant to Art. 13 para. 3 lit. b no. 1 StA conducts trading in taxable instruments on behalf of third parties, while an intermediary pursuant to Art. 13 para. 3 lit. b no. 2 StA causally…