Swiss Federal Supreme Court on Tax Residency: Relocation to Zug

Facts of the Case

The taxpayer originally lived in the Canton of Zurich. In 2015, he sold his condominium to a limited liability company (GmbH) of which he himself was the sole shareholder and managing director. Shortly thereafter, he registered as a resident in the Canton of Zug, claiming that he had moved there.

However, for the tax periods 2017–2019, the Zurich cantonal tax authorities continued to assert their taxing rights, arguing that the taxpayer’s center of life remained in Zurich.

The taxpayer, on the other hand, claimed that his tax domicile had moved to the Canton of Zug.

Legal Issue

The key question was where the taxpayer’s principal tax domicile was located — in the Canton of Zurich or in the Canton of Zug.

According to established case law, a tax domicile is located where a person resides with the intention of remaining permanently and where the center of their vital interests lies.

Decision of the Federal Supreme Court

The Federal Supreme Court ruled in favor of the Zurich tax authorities and overturned the decision of the lower court.

It concluded that the taxpayer’s actual center of life remained in the Canton of Zurich, and that he therefore remained taxable there.

Several circumstances indicated that the alleged domicile in Zug was not genuine:

• The alleged rental agreement for the room in Zug was not signed.
• The rent was paid in cash, which is unusual.
• There was no evidence of an actual move (e.g., furniture transport).
• The taxpayer cooperated only partially with the tax authorities and refused to provide certain documents.

These indications led the Federal Supreme Court to conclude that the arrangement constituted a sham domicile.

Consequences

The taxpayer must pay taxes for the years 2017 to 2019 in the Canton of Zurich, most likely including late payment interest.

Practical Significance

The judgment confirms the strict approach of the Federal Supreme Court regarding tax domicile:

• A formal registration in another canton is not sufficient.
• What matters is where a person’s actual living circumstances are located.
• Anyone claiming a change of residence for tax purposes must be able to credibly substantiate it.
• Lack of cooperation may work to the detriment of the taxpayer.

Particularly in the case of relocations to tax-advantaged cantons — such as from Zurich to Zug — tax authorities are increasingly scrutinizing whether a genuine new center of life has actually been established.

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