Facts
The Pension Fund A. (respondent) is a foundation based in U. that manages occupational retirement provision for employees of B. AG and affiliated companies. In 2012, it transferred its entire real estate portfolio (including five properties in Zurich) to the Zurich Investment Foundation (acquiring foundation), which serves exclusively for the collective investment of second-pillar pension assets and is tax-exempt. Compensation was provided by issuing non-par value and irrevocable claims in the investment group "I." with a total value of CHF 48,621,000.-.
The Tax Office of the City of Zurich denied a tax deferral for the real estate gain in a tax assessment decision dated 1 March 2016 and assessed the tax at CHF 1,126,448.-. The pension fund’s objection against this decision was dismissed in a ruling dated 22 August 2019. The Tax Appeals Court of the Canton of Zurich and the Administrative Court of the Canton of Zurich overturned these decisions and granted the tax deferral. The municipal tax office of the City of Zurich then filed an appeal in public law matters with the Federal Supreme Court, seeking the annulment of the Administrative Court’s judgment and the assessment of the real estate gain tax.
Considerations
The Federal Supreme Court examined whether the transfer of the real estate from the pension fund to the investment foundation qualifies as a "division" within the meaning of Art. 80 para. 4 sentence 2 OPA and thus justifies a tax deferral. It was first established that both Art. 24 para. 3 DTHA (or the cantonal implementing provision § 216 para. 3 lit. d StA/ZH) and Art. 80 para. 4 sentence 2 OPA could be considered as possible legal bases for a tax deferral. However, the legislator intended that Art. 80 para. 4 sentence 2 OPA retains independent significance vis-à-vis the later provisions of the DTHA and is to be interpreted without recourse to the restrictive requirements of the cantonal regulations. This follows from the legislative history and the dispatch on the MergA, in which it was clarified that the tax neutrality of the division directly results from Art. 80 para. 4 OPA, without the need for an operating clause.
The term "division" in Art. 80 para. 4 sentence 2 OPA is not limited to specific restructuring forms such as partial or full liquidations. What is decisive is that the real estate portfolio continues to be tied to the pension provision purpose. This is the case if the transferred properties continue to be used within the framework of occupational retirement provision, even if they are now held indirectly via the investment foundation. The pension fund remains economically involved in the returns from the real estate, and the rights of the insured persons are preserved. Moreover, the transaction serves to optimise asset management, diversify risks, and achieve an appropriate return, which complies with the investment principles under Art. 71 para. 1 OPA.
The Tax Office of the City of Zurich argued that Art. 80 para. 4 OPA only applies in cases of partial or…