Profits realised by tax-exempt pension fund schemes from the sale of real estate properties in the canton of Geneva are subject to Geneva real estate capital gains tax and not ordinary corporate income tax. This was decided by the Federal Supreme Court in its decision dated 10 June 2024 (9C_393/2023).
The canton of Geneva previously took the view that gains from the sale of real estate properties located in the canton of Geneva that were realised by tax-exempt pension fund schemes were subject to cantonal and communal corporate income tax. The approach pursued resulted in particular from the “mixed system” applicable in the canton of Geneva. The Geneva tax authorities have insisted on their practice for years. This is despite the fact that the harmonisation provisions at federal level provide for taxation with the real estate capital gains tax.
The opinion of the Geneva tax authorities was particularly important in connection with the applicable tax rate: In the canton of Geneva, the real estate capital gains tax law provides for a tax rate of 0% for a holding period of 25 years or more, while the corporate income tax rate at cantonal and communal level in Geneva is higher.
This has already led to uncertainties in the calculation of deferred taxes, particularly in the case of investment foundations. Therefore, in many cases at least the corporate income tax rate was used for the calculation. Finally, pension funds and investment foundations had to deal with the issue in the event of a sale.
In its decision dated 10 June 2024 (9C_393/2023), the Federal Supreme Court ruled that the provisions of the federal law clarify that gains from the sale of real estate properties by tax-exempt pension fund schemes are subject to real estate capital gains tax.
With regard to the canton of Geneva, the provisions of the “Loi générale sur les contributions publiques” and not the “Loi sur l’imposition des personnes morales” are therefore relevant. This means that the real estate capital gains tax rate (reduced to 0% in the canton of Geneva for a holding period of 25 years or more, as mentioned above) and not the corporate income tax rate applies to capital gains realised by tax-exempt pension fund schemes.
Fortunately, the Federal Supreme Court has thus confirmed the view expressed by one of the authors already years ago in an article and has finally provided clarity for pension funds and investment foundations with real estate properties in the canton of Geneva.
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