Swiss Tax – The One Pager

Facts

In its decision dated 4 September 2025 (9C_239/2025), the Federal Supreme Court examined the legitimacy of a discretionary tax assessment (“Ermessensveranlagung”). Two taxpayers carried out a share repurchase of unlisted shares as part of a transaction that was not documented in writing, at a purchase price of CHF 3,500 per share. This declared share price deviated significantly from the official tax value of CHF 64,500 per share, determined by the tax authorities in accordance with Circular No. 28 of the Swiss Tax Conference. The tax authorities therefore issued a discretionary assessment, as the taxpayers failed to explain in a sufficiently credible manner how the acquisition had been financed or at what effective price the transaction had actually taken place.

Legal Basis

Pursuant to Art. 130 para. 2 of the Federal Direct Tax Act (DBG), a discretionary tax assessment may be issued if the taxpayer fails to comply with his duty to cooperate, or if the taxable factors cannot be determined with the required degree of accuracy due to factual uncertainties. In such cases, the tax authority must proceed according to its diligent discretion, ensuring that the assessment reflects the taxpayer’s economic reality as accurately as possible. It may consider the development of the taxpayer’s wealth, lifestyle, and the plausibility of the information provided. The Federal Supreme Court also emphasized that in these cases the Court's power of review is limited: it will only intervene if the cantonal tax authority’s estimation is manifestly incorrect or arbitrary.

Application to the case at hand

According to the Court the significant discrepancy between the declared purchase price of CHF 3,500 and the taxable value of CHF 64,500 per share gives rise to a presumption that the actual purchase price was higher. Such a large difference makes it highly unlikely that a shareholder would voluntarily sell their stake at a price well below the tax-recognised value.

The circumstances of the transaction – an oral agreement and payment in cash – were considered unusual and reinforced the uncertainty surrounding the true facts. The appellants argued that they had cooperated with the tax administration by disclosing the purchase price and the method of payment. However, the Federal Supreme Court left it open whether a formal breach of the duty to cooperate had occurred, holding that the existing factual uncertainty alone was sufficient to justify a discretionary assessment.

The Court further noted that a higher price than the tax value appeared plausible, particularly given the economic advantage of becoming the company’s sole shareholder. As the estimation made by the tax authorities, based on the valuation for wealth tax purposes under Circular No. 28, was neither manifestly disproportionate nor methodologically flawed, the Federal Supreme Court upheld the cantonal assessment.

Key Takeaways

• The decision confirms the strict allocation of the burden of proof in Swiss tax proceedings and the broad discretion granted to tax authorities when estimating taxable factors. Missing documentation, unusual payment methods, or significant discrepancies between market value and tax value may justify an estimated assessment, even without a formal breach of the taxpayer’s duty to cooperate.
• Transparent pricing and documentation duties: in transactions concluded at a price below the wealth tax valuation, a sound economic rationale must be documented. Written agreements and proof of payment are essential to avoid tax corrections or even a discretionary assessment.