Binding effect of formally final tax domicile rulings and procedural forfeiture of the objection of lack of jurisdiction

Facts

Parties and procedural history:

The A. GmbH (hereinafter: the taxpayer) is a company with its statutory seat initially in U./LU, and from 14 December 2020 in V./ZG. Its sole shareholder and managing director B. had his place of residence during the tax periods 2012 to 2018 in W./ZH and X./ZH respectively. The tax office of the Canton of Lucerne (KSTV/LU) assessed the taxpayer for the tax periods 2014 to 2017 for the cantonal and municipal taxes of the Canton of Lucerne as well as for the direct federal tax. The assessment orders became final. For the tax period 2018, the Canton of Lucerne suspended the assessment procedure due to a potentially conflicting tax claim by the Canton of Zurich.

The Canton of Zurich first asserted its tax sovereignty over the taxpayer on 23 December 2019 and issued a determination order on 31 January 2020 stating that it claimed tax sovereignty from the tax period 2014 onwards. The objection decision of 15 May 2020 against this order became formally final. Subsequently, the Canton of Zurich assessed the tax periods 2014 to 2018 for cantonal and municipal taxes, but not for the direct federal tax. The taxpayer lodged an objection against these assessment orders, whereupon the tax office of the Canton of Zurich issued an objection decision on 7 January 2021 declining to enter into the objection. It justified this on the grounds that the taxpayer had not appealed the objection decision of 15 May 2020, which is why the requested determination of lack of tax sovereignty was inadmissible. It also declined to join the Canton of Lucerne as a party to the proceedings.

The taxpayer filed an appeal with the Tax Appeals Court of the Canton of Zurich, which dismissed the appeal with a decision of 10 May 2021. It then filed a complaint with the Administrative Court of the Canton of Zurich, which dismissed the complaint with a decision of 12 January 2022. With a complaint of 24 February 2022, the taxpayer then filed a public-law complaint with the Federal Supreme Court. The Canton of Zurich requested the dismissal of the complaint, while the tax office of the Canton of Lucerne requested the granting of the complaint against the Canton of Zurich and, in the alternative, the dismissal of the complaint against the Canton of Lucerne.

Legal issues: The complaint concerns the binding effect of a formally final tax domicile ruling of the Canton of Zurich as well as the procedural forfeiture of the objection of lack of tax sovereignty. It also concerns the admissibility of the complaint against non-final cantonal decisions in cases of double taxation.

Considerations

1. Admissibility of the complaint and procedural forfeiture:

The Federal Supreme Court first examines the admissibility of the complaint. Since the tax office of the Canton of Zurich had declined to enter into the taxpayer’s objection, the subject matter of the dispute was limited to the question of whether it should enter into the objection. In the absence of a cantonal final-instance decision that at least preliminarily addresses the taxpayer’s subjective tax liability and tax domicile and contains factual findings in this regard, the Federal Supreme Court cannot currently assess the correctness of the assessments by the Canton of Zurich. The taxpayer’s alternative applications against the Canton of Lucerne are therefore inadmissible, as there is no waiver of the requirement of cantonal final-instance jurisdiction. The Court will not enter into these applications. Nor will it address the objection of forfeiture raised by the Canton of Lucerne against the Canton of Zurich.

2. Binding effect of formally final tax domicile rulings:

The Federal Supreme Court changes its previous case law on the binding effect of formally final tax domicile rulings. A positive tax domicile ruling, in which a canton establishes its tax sovereignty, is to be qualified as a preliminary or interlocutory decision on jurisdiction. Such rulings do not have substantive legal force, but they do lead to a procedural forfeiture of the objection of lack of jurisdiction if they are not appealed. However, the taxpayer has no entitlement to a tax domicile ruling if it has unconditionally acknowledged the tax liability in a canton in knowledge of a conflicting tax claim by another canton. This applies regardless of whether the canton established tax sovereignty separately or decided it preliminarily in the assessment order.

3. No binding effect of the Federal Supreme Court at the substantive-law level:

The Federal Supreme Court is not bound by the substantive-law findings of a formally final tax domicile ruling. Such a binding effect would be incompatible with current procedural law and tax harmonisation. The Federal…