On 1 April 2008, complainant A. sold a property she had occupied herself in the Canton of Berne at a profit of CHF 5'733'539. However, taxation was deferred due to the acquisition of a replacement property she had used herself in the Canton of
Geneva. She then also sold this replacement property in June 2010 and did subsequently not acquire any new property.
On 1 February 2012, the Tax Administration of the Canton of Berne assessed complainant A. for the year 2010 with a claim from real estate gains in the amount of CHF 1'906'682.70. A. first lodged an appeal with the Tax Administration of the Canton of Berne, then an appeal to the Tax Appeal Commission and finally an appeal to the Cantonal Administrative Court. All appeals lodged by the complainant were dismissed. As a result, A. lodged an appeal with the Federal Supreme Court in public law matters on 20 January 2017. She demands the annulment of the previous instance's ruling and no taxation by the Canton of Berne. The Fe-deral Supreme Court approved the appeal by decision of 28 September 2017 (2C_70/2017) with the follow-ing reasons.
Decomposition method versus uniform method
The Federal Supreme Court first examined the relevant provisions of the Tax Harmonization Act (Art. 12 paragraph 1 and 3 StHG). Art. 12 para. 3 StHG stipulates a tax deferral in the event of sale of a perma-nently and exclusively owner-occupied residential property if the proceeds are spent on a similar property within a certain period.
The disputed question was now whether the Canton of Berne, as the canton of departure, is responsible for
assessment in the event of deferral of the then taxable profit, or whether the Canton of Geneva, as the can-ton of arrival, is responsible for taxation. The first variant is defined as the decomposition method, the se-cond as the uniform method.
In its decision, the Administrative Court of the Canton of Berne referred to an earlier ruling (2C_337/2012) by the Federal Supreme Court. In it, the Federal Supreme Court had declared itself in favour of the uniform method in principle. According to this view of the Administrative Court, the Canton of Geneva as the canton of arrival should assume the taxation of the property gains in the present case. However, the question of so-called «reinvestment-related changes of ownership» was left open. «Reinvestment-related changes of ow-nership» occur when a replacement property acquired with the property gains is sold again within a short period of time. The Administrative Court referred to the Swiss Tax Conference (STC), which estimates a period of 5 years as a transitional period between the decomposition method and the uniform method. If the replacement object is resold in another canton in the first 5 years, the decomposition method is to be app-lied. In the present case, the Administrative Court thus affirmed the taxation and assessment competence of the Bernese tax authorities.
However, the complainant A. claimed that the uniform method had to be applied and demanded taxation by the Genevese authorities. In her argumentation, she also referred to the above-mentioned decision of the Federal Supreme Court. Furthermore, the complainant stated that the cantonal practices were not uniform and the STC's advice was not binding. According to the complainant, there is no reason to treat «reinvest-ment-related changes of ownership» differently anyway. With the Tax Harmonization Act, the legislature is striving for intercantonal freedom of movement, which in turn facilitates the mobility of tax subjects. In stating this, she appealed to the generosity of the cantons and the voluntary renunciation of taxation. Another argu-ment put forward by the complainant was the lack of a legal basis for a retention period in the present case. No such period is currently apparent, nor is there a need for one de lege ferenda. The usual regula-tions regarding tax evasion would already prevent such a risk. In the present case, no criteria for tax evasion could be identified. According to the complainant, the application of the uniform method results in a neutral result: tax substrate of individuals who move to other cantons and make intercantonal replacements, which is lost to the cantons, can be compensated by individuals moving to the cantons with a latent tax substrate. This would prove that the Canton of Geneva must be solely responsible for taxation (uniform method) - otherwise there would be a violation of Art. 127 para. 3 BV.
Equal treatment of commercial and residential property
In its considerations, the Federal Supreme Court ultimately referred to the same decision (decision 2C_337/2012). In said ruling, however, the situation was different: The intercantonal replacement procure-ment concerned a commercial property and not, as in the present case, a residential property. The Federal Supreme Court ruled that the canton of arrival is competent as the taxing community. With reference to the present case, the Federal Supreme Court has now declared that equal treatment of commercial and resi-dential properties is desired in accordance with harmonisation law.
«Modo legislatoris» procedure
Furthermore, the Federal Supreme Court referred to BGE 143 II 233, in which the term permanent and exclusively owner-occupied residential property was interpreted according to Art. 12 para. 3 lit. e StHG. It came to the conclusion that the legislature had a qualified silence in mind regarding the minimum holding period of a property. Also, de lege lata there is no regulation regarding the intercantonal allocation of taxa-tion powers. For this reason, the Federal Supreme Court considers itself obliged to establish a double taxa-tion provision «modo legislatoris». The Federal Supreme Court in turn did this with a reference to
BGE 143 II 233 and the missing minimum holding period from Art. 12 para. 3 lit. e StHG. According to the Federal Supreme Court, there are thus hardly any factual reasons that justify partial application of the de-composition method to reinvestment-related changes of ownership over five years. With these considera-tions, the Federal Supreme Court assigned the right of taxation solely to the Canton of Geneva.
In the opinion of the Federal Supreme Court, what is required is a uniform legal situation, whereby only the uniform method can be applied to changes of ownership that are related to reinvestment. In the present case, only the Canton of Geneva, as the canton of arrival, can tax the deferred profit - a taxation by the Canton of Berne would contravene the prohibition of intercantonal double taxation within the meaning of
Art. 127 para. 3 BV.