Caminada Zurich leads decision regarding the sale of a real estate company under the DTT CH-D

The Zurich Tax Appeal Court confirmed in its newly decision in favor of CAMINADA ZÜRICH's client that a sale of the majority of shares in a real estate company by a German seller constitutes in a sale of movable assets (sale of a participation) despite the economic change of ownership in Switzerland.

In canton of Zurich and despite of an international context, the sale of the majority of shares in a real estate company triggers real estate capital gain taxes based on the concept of the economic change of ownership (such a sale will be qualified like a direct sale of the real estate).

If the double taxation agreement between Switzerland and Germany is applied, Germany is granted the right of taxation. The point of contention in the decision is the lack of a real estate clause (Art. 13 paragraph 4 OECD Model Tax Convention on Income and Capital) in the double taxation agreement between Switzerland and Germany.

According to the appellants, although there is an economic change of ownership, the sale of shares in a real estate company constitutes in a sale of movable assets, which is why the right of taxation is assigned to Germany and Switzerland or the City of Zurich must therefore waive its taxation right.

The decision is in line with the prevailing doctrine and negates the attempt of a change in practice introduced by the City of Zurich. As a result, effective double taxation can be prevented in the present case, as the sale of shares by an individual is already taxed in Germany. The decision is not yet legally binding.