Offsetting a tax provision formed by official authority

Provisions are permissible for obligations existing during the fiscal year, the amount of which is still undetermined. Such as taxes, which were not assessed at the time of assessment. Previous provisions that are no longer justified are attributed to the taxable profit. This also applies to tax provisions formed ex officio.

On May 1, 2017, the Federal Court decided on a case, which had already been judged by the Administrative Court of the Canton of Schwyz. A real estate company was assessed by the administration of the Canton of Schwyz for the direct federal tax of 2012 with a net profit of 5,611,900 Fr. Unlike the real estate company in its tax declaration, it took a different intercantonal tax distribution. This led to higher property gain taxes in the Canton of Bern, which is why the administration immediately formed a provision of 600,000 Fr. for it. Due to an objection by the taxpayers, the intercantonal tax distribution was changed and the additional tax provision for state and local taxes was omitted. However, no objection was filed against the assessment for the direct federal tax of 2012, so it became effective. For the tax year 2013, the provision of 600,000 Fr. for the direct federal tax was dissolved, and the real estate company was assessed with a net profit of 1,138,900 Fr., since the provision of 600,000 Fr. was no longer justified and thus flowed into the profit. The taxpayers requested the Federal Court to declare that the dissolution of the provision was not justified and therefore the net profit should be set at 538,900 Fr.

However, the Federal Court dismissed the complaint. There is no right to maintain a provision if the tax authorities had waived its set-off in previous years or had granted such unjustly. The tax administration also did not violate the principle of legitimate expectations, as the dissolution of a provision formed by the tax administration during the assessment process is also permissible if the provision was originally unjustified and therefore should have been taxed at the time of its formation. Moreover, the complainant could have contested the unjustly granted tax provision by filing an objection, which she neglected to do. The court also emphasized that all provisions granted in previous years that reduced profits are attributed to the taxable profit. This includes - as in this case - provisions formed ex officio, and not only those booked by the taxpayer on the income statement as described in Art. 63 para. 2 DBG.

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