Tax deferral for real estate

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 Bern assessed the 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 objection against this with the tax administration of the Canton of Bern, then an appeal with the Tax Appeals Commission and finally an appeal with the Cantonal Administrative Court. All appeals by the complainant were dismissed. On the basis of this, A. filed an appeal in public law matters with the Federal Supreme Court on 20 January 2017. She requested that the ruling of the lower court be set aside and that the canton of Bern refrain from taxing her. In its decision of 28 September 2017(2C_70/2017), the Federal Supreme Court upheld the appeal with the following grounds.

Decomposition method versus unit 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 Bern Administrative Court referred to an earlier ruling(2C_337/2012) of the Federal Supreme Court. In that ruling, the Federal Supreme Court had declared itself in favour of the unit method in principle. According to this view of the Administrative Court, the Canton of Geneva, as the canton of immigration, should take over the taxation of the real estate gain in the present case. However, the question of so-called "reinvestment-related changes in ownership" was left open. "Changes in ownership close to reinvestment" are deemed to exist if a replacement property acquired with the real estate gain is sold again within a short period of time. The Administrative Court referred to the Swiss Tax Conference SSK, which estimates a period of 5 years as the transitional period from the decomposition method to the unit method. If the replacement property is resold in another canton, the decomposition method is to be applied for the first 5 years. In casu, the Administrative Court thus affirmed the taxation and assessment competence of the Bernese tax authority.

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 properties

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 procurement 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 concept of permanent and exclusively owner-occupied residential property was interpreted in terms of Art. 12 para. 3 lit. e StHG. It came to the conclusion that the legislator had a qualified silence in mind with regard to the minimum holding period of a property. Similarly, there was no de lege lata regulation regarding the intercantonal allocation of taxation competences. For this reason, the Federal Supreme Court felt compelled "modo legislatoris" to establish a double taxation rule. The Federal Supreme Court did so again with a reference to BGE 143 II 233 and the lack of a minimum holding period from Art. 12 para. 3 lit. e StHG. According to the Federal Supreme Court, there were therefore hardly any objective reasons that justified a partial application of the decomposition method to reinvestment-related changes in ownership for a period of 5 years. With these considerations, the Federal Supreme Court assigned the right of taxation solely to the Canton of Geneva.


According to the Federal Supreme Court, what is required is a uniform legal situation, which means that only the uniform rule can be applied even in the case of reinvestment-related changes of ownership. In the present case, only the Canton of Geneva, as the canton of residence, can tax the deferred gain - taxation of the Canton of Bern would run counter to the prohibition of intercantonal double taxation within the meaning of Art. 127 para. 3 of the Federal Constitution.