Taxability of a lump-sum benefit from a vested benefits policy including capital gains

Facts

The complainant [A.] received a lump-sum benefit of CHF 544'740.66 on 24 January 2018 from the vested benefits foundation of UBS AG following survival. This consisted of the original payment into his account with the vested benefits foundation (CHF 352'610.40), income from assets he had invested in a fund (CHF 48'727.33), and an increase in value of the fund assets (capital gain).

By final assessment decisions of 18 March 2018, the Tax Administration of the Canton of Graubünden and the Municipal Tax Office of [B.] set the taxable benefit for cantonal and municipal taxes and direct federal tax at (rounded down) CHF 544'700.--.

The complainant lodged an objection and argued that only the original capital and the income, totalling CHF 401'337.73, were taxable; the remainder was a tax-free capital gain from free investment. The Cantonal Tax Administration dismissed the objection by decision of 12 April 2019. The Administrative Court of the Canton of Graubünden, 4th Chamber, dismissed the appeal on 12 July 2019 (A 19 17).

By public law appeal of 30 July 2019, the complainant requested that the taxable amount be set at CHF 401'337.73. The Administrative Court, the Cantonal Tax Administration and the Federal Tax Administration requested that the appeal be dismissed.

The subject matter of the dispute is whether lump-sum benefits from occupational pension provision are also subject to income tax to the extent that they are based on capital gains.

Considerations

The Federal Supreme Court permits a single judgment for cantonal and municipal taxes and direct federal tax, since the disputed legal question is regulated identically under federal law and harmonised cantonal law. The public law appeal is admissible (Art. 82 lit. a, Art. 86 para. 1 lit. d FSCA in conjunction with Art. 146 DFTA and Art. 73 DTHA). The Federal Supreme Court reviews the application of harmonised tax law with full cognition, insofar as the DTHA leaves no room for discretion.

The complainant argues that the wording of Art. 22 para. 1 DFTA and Art. 23 para. 1 StA/GR ('all income') is exhaustive; only what is expressly named is taxable, and therefore capital gains are not covered. The Court, by contrast, refers to the constitutional basis in Art. 111 para. 2 Cst. and to Art. 83 FSCA, under which benefits from pension institutions are fully taxable.

Art. 22 DFTA and Art. 7 para. 1 DTHA give concrete expression to this provision. The legislator implemented the so-called Vaud model, under which full deductibility of contributions is matched by full taxability of benefits. Decisive is solely the entry of funds into the pension cycle for deductibility, and the exit from the cycle for taxability; how the payment is financed (capital repayment, interest, distribution or capital gains) is irrelevant.

A tax exemption for the portions based on capital gains would moreover lead…