After giving up permanent employment and becoming self-employed, a pension fund member cashed in his pension benefits. Simultaneously, he relocated to another canton; this caused a tax dispute with regard to the payment date of the matured pension benefits.

On 22 December 2006, A. notified his pension plan that he was becoming self-employed effective 1 January 2007. He applied for his termination benefit to be transferred to his designated bank account on 31 January 2007.

Exit in 2006

A's employer notified the pension plan of A's exit effective 31 December 2006. In its termination statement of 6 February 2007, the pension plan indicated 31 January 2007 as the exit date. The pension plan later informed A. that his application had been approved internally, based on the facts, on 4 January 2007.

The 2nd pillar termination benefit was disbursed to A. for good value on 6 February 2007. However, A. had already received the pillar 3a disbursement on 2 February 2007. Moreover, on 12/13 January 2007, A. and his wife transferred their place of residence from Pfäffikon/SZ to Zurich.

The Zurich tax office assessed taxes based on the disbursement date

The Zurich tax office assessed all the capital payments since the amounts were disbursed after the couple had transferred their tax residence to Zurich. A. appealed that decision.

The Tax Appeals Commission found partly in his favour ruling that the 2nd pillar lump-sum capital benefit had been transferred prior to the change in residence and only the 3a pillar lump-sum benefit corresponded to an annual benefit. Both the Administrative Court and the Federal Court agreed.

The second sentence of Article 68(1) of the Federal Law on the harmonisation of direct cantonal and municipal taxes (StHG) introduces an exception for lump-sum pension benefits. Basically, according to the first sentence of Article 68(1), if a person transfers his tax residence within Switzerland, his tax liability based on his personal affiliation for the current tax period is in the canton where he was resident at the end of that period. In this case, Canton Zurich. However, the exception provides that pension benefits are taxable in the canton where the beneficiary was resident at the time they fall due.

For the Administrative Court and the Federal Court, assessment is based on entitlement and maturity

The Zurich Administrative Court sought to determine when the taxpayer had communicated the necessary indications to his pension fund and when he had exited the fund. He exited the pension fund at the end of 2006. The Administrative Court thus established the moment when the beneficiary could claim absolute entitlement to the termination benefit.

The Federal Court sought to establish when there is a fixed claim to the termination benefit. It came to the conclusion that, in normal cases – such as payment of a lump-sum capital benefit on retirement – given the conditions to be fulfilled for a cash payment, the due date and not the actual disbursement date was authoritative.