These decisions reveal that Zurich tax authorities critically examine the tax domicile of holding companies which have their statutory seat in another canton but do have a close link to the canton of Zurich. It is not excluded that other cantons shall follow the same practice.

This newsletter outlines the SFSC’s most recent case law on the matter, analyses the practical implications of the decisions, and discusses current developments in administrative practice, using as an example the case decided in SFSC Decision 9C_558/2024 from 29 April 2025.

Decision of the Swiss Federal Supreme Court 9C_558/2024 from 29 April 2025

Facts of the Case

The case involves a company with its statutory seat in the canton of Zug. The company's corporate purpose was to acquire, hold, manage and sell participations, i.e. it was a pure holding company. The only board members and shareholders, both with individual signing authority, were a married couple residing in the canton Zurich.

The company held 100% of the shares in its subsidiary, which in turn owned 100% of an operational real estate company with the statutory seat in the canton of Zurich. The shares in the operational real estate company were later transferred directly to the holding company. The husband also served as a board member with individual signing authority in both subsidiaries.

Despite the company’s formal seat in the Canton of Zug, the Zurich cantonal tax authorities took the position that the PoEM was located at the shareholders’/directors’ place of residence in Zurich. In their view, the key decisions in line with the company’s stated corporate purpose were made there.

The Zurich tax authority based its conclusion primarily on the following arguments:

• The only shareholders of the holding company were also the board members of all three companies involved, while the operational entity had its registered office in the Canton of Zurich;
• The holding company’s annual accounts did not show any rental expenses, and there was no evidence of business premises or operational infrastructure in the canton of Zug;
• There was a close personal overlap in management, as the same individual exercised board functions in both the holding and the operating company.

Based on these findings, the Zurich tax authority concluded that the company’s decisions in pursuit of its corporate purpose were most likely taken in Zurich, at the place of residence of the directors.

Decision of the Swiss Federal Supreme Court

The Court upheld the position of the Zurich tax authorities. It found that the PoEM was indeed located in the canton of Zurich, i.e. at the residence of the sole shareholders and directors. The burden of proof was considered fulfilled in this respect.

The statutory seat in another canton was regarded as purely formal, and therefore, under harmonised cantonal tax law, the holding company was found to be fully taxable in the Canton of Zurich.

Arguments of the Federal Supreme Court

The SFSC emphasized that in the case of classical holding companies, management activities are generally less extensive than in trading or manufacturing companies. The relevant business activities are typically limited to the administration of participations, in particular tasks such as bookkeeping, collection of receivables, profit distribution, as well as occasional purchase and sale decisions.

The determination of the PoEM depends on the activities that are essential to fulfilling the company’s corporate purpose; if this purpose mainly involves asset management or administrative tasks, the decisive factor is where those tasks are carried out. It is thus important whether the activities that collectively serve to achieve the corporate purpose are carried out at the statutory seat or at another location.

The Court concluded that there were sufficient indications that the effective management of the holding company was exercised from the residence of the two directors in Zurich. The Court further confirmed that, in the context of intercantonal taxation, a reduced burden of proof applies: the tax authority only needs to demonstrate that it is more likely than not that the essential corporate decisions were predominantly taken at a particular location.

The holding company, in turn, failed to provide adequate counterevidence that would have substantiated actual management in the canton of Zug.

Further Decisions of the Federal Supreme Court

In its further decisions, namely SFSC Decision 9C_569/2024 and 9C_570/2024, both dated 29 April 2025, the SFSC once again upheld the position of the Zurich tax authorities, confirming the PoEM of the holding companies was located in the canton of Zurich.

The Court’s reasoning was largely consistent with that of the decision 9C_558/2024: the two holding company – one had its statutory seat in Zug and the other in Obwalden - held a participation in an operational company with its statutory seat and business premises in Zurich; both entities had identical board members, all residing in the canton of Zurich. The close ties between the companies and the concentration of decision-making authority with Zurich-based board members supported the conclusion that the PoEM was located in Zurich. These various connections to the canton of Zurich outweighed the formal statutory seat of the companies.

Furthermore, the holding companies were unable to demonstrate the existence of their own business premises (beyond a mere domiciliary address) or any other substantial presence in the canton of their statutory seat (Zug or Obwalden).

It should also be noted that the SFSC, in a recent decision concerning a holding company (Judgment 9C_424/2024 of 29 April 2025), decided in favor of the taxpayer. The Court confirmed the company’s tax domicile at its registered office in the Canton of Obwalden. The SFSC held that the tax authority had not demonstrated that the company’s key business decisions were predominantly made at a specific location in the Canton of Zurich or that the business was conducted there. Multiple possible points of reference were deemed insufficient. It is also notable that the Court affirmed the tax domicile in Obwalden even without evidence of rental expenses there.

To note: If a holding company has little or no substance at its statutory seat, this does not automatically mean that the place of effective management is located at the director’s place of residence. Rather, the tax authority must be able to demonstrate that the key business decisions are predominantly made at a specific location within the canton.

Practical Implications of the Recent Decisions

Traditionally, holding companies with minimal operational activity were often able to rely on formal criteria such as the statutory seat and rudimentary infrastructure in order to substantiate their tax domicile. The SFSC's recent decisions, however, confirm a clear trend: tax authorities are increasingly scrutinising the PoEM of holding companies and are questioning the validity of the mere statutory seat. This practice is particularly problematic when a holding company’s activities are essentially limited to holding investments and the director only makes a few decisions per year.

Based on the approach of Zurich tax authorities and the Federal Supreme Court’s practice, the following structures in which

1. a holding company incorporated in one canton holds 100% of an operating subsidiary in another canton,
2. the shareholders and/or directors are resident in that other canton, and
3. the board members of the holding company simultaneously act as board members of the subsidiary;

should be carefully reviewed from a tax perspective. In such constellations, there is a high risk that the PoEM will be attributed to the canton of residence of the decision-makers (i.e. the other canton, not the seat canton), with potential consequences regarding intercantonal taxing rights.

Cantonal tax authorities are likely to scrutinise such structures more closely in the future, especially where there are further indications of effective management in the shareholders’ or directors’ canton of residence.

Recommendation: Holding companies with comparable structures are well advised to assess their tax risks at an early stage and to take appropriate measures to substantiate their tax domicile at their statutory seat.

Our Tax Team will be happy to support you with the risk assessment and with any further questions concerning holding companies and intercantonal double taxation.