Postal delivery of tax assessment notices abroad

In March 2009, C. GmbH, Linz (Austria) requested the Tax Administration of the Canton of Valais to deliver the mail (e.g. tax assessment notices) for its client (hereinafter taxpayer) directly to Linz (Austria) in future, which the Tax Administration of the Canton of Valais subsequently did.

In August 2012, the new legal representative of the taxpayer, BDO AG (hereinafter referred to as the plaintiff), asserted that the taxpayer had not yet been served with a tax assessment order for the direct federal taxes and the state tax for the 2009 tax period by that date. The tax administration accepted this letter as a belated appeal against the 2009 tax period, but did not reply with a formal decision of objection, but in the form of a letter without notice of appeal. The taxpayer then filed a complaint addressing denial of justice with the cantonal Tax Appeals Commission on 18 September 2012. The commission accepted the complaint and directed the file back to the previous instance, instructing it to issue an appealable injunction. On 19 December 2013, the tax administration of the Canton of Valais issued a formal decision which did not allow the taxpayers to object because of a delay (decision not to intervene). The appeal brought by the plaintiff against this decision was dismissed by the Tax Appeals Commission, after which the plaintiff was referred to the Federal Supreme Court. The Federal Supreme Court dismissed the appeal with its decision on 19 June 2017 (2C_408,409/2016) on the following grounds.

Non-delivery vs. initiation defects

According to the Federal Supreme Court, the opening is a unilateral legal act that must be received but not accepted, which enables the recipient to take note of the order. Thus, a judgment or an order only acquires legal effect when it is communicated to the parties. Prior to its communication, it is a non-judgment which must be taken into account ex officio. However, this non-notification must be distinguished from notification that has taken place but suffers from opening defects. For if the principle that a party should not suffer any disadvantage from a defective opening is observed, such defective service may nevertheless achieve its purpose and the principle of good faith limits the possibility of relying on defects of form.

Principle of territoriality

The principle of territoriality under customary international law states that the exercise of sovereign authority on a state's territory by another state without its consent is contrary to international law. According to the prevailing view in Switzerland, even "the service of a document sent by a court constitutes an exercise of sovereign power". Thus, the service of such documents abroad requires the cooperation of the foreign state in order not to violate its sovereignty. The foreign state could give its consent, for example, through intergovernmental agreements. Direct postal service of such documents, which, however, are not based on a treaty under international law or are contrary to the domestic law of the recipient state, are thus in principle contrary to international law and constitute an opening defect in the light of international law.

Venire Contra Factum Proprium

Although the appellant complained that the lower court had arbitrarily determined the facts of the case and argued that the taxpayer had never received the 2009 assessment notice, the Federal Supreme Court also concluded, after assessing the overall circumstances, that the 2009 assessment notice had been served on the Austrian representative at the time (C. GmbH). The lower court's assessment of the evidence was neither contradictory nor arbitrary. However, the direct postal delivery of the 2009 assessment ruling to the representative in Austria without an international treaty basis was a violation of the principle of territoriality. The tax administration should not have granted the request of the taxpayer and its representative at the time. Thus, although there was no non-disposal, there was a deficiency in the opening of the procedure, on which the complainant could in principle rely. However, because in casu the taxpayer herself had requested direct postal service abroad, it would be tantamount to a venire contra factum proprium if she were to assert a deficiency in the opening of proceedings against this background. According to the principle of good faith, this conduct would not be legally protected, and the tax administration, as well as the Tax Appeals Commission, could therefore consider the objection filed about a year later to be out of time.

Final remark

As a result of internationalisation, cross-border correspondence between taxpayers and tax authorities from different countries has increased massively. Although the need and willingness of taxpayers to correspond directly with foreign tax authorities is increasing, more attention must be paid to the legally correct communication between authorities and taxpayers in the international arena as well, as otherwise legal certainty suffers.