Residence Miremont v Administrative Tribunal of Geneva

CourtFederal Tribunal (Switzerland)
Switzerland, Federal Tribunal.
Residence Miremont sa and Another
Administrative Tribunal of Geneva and Another

International organizations Officials Immunity Exemption from taxation Whether official can be regarded as taxpayer in receiving State Loan made by international official to property company in receiving State Whether interest paid to official deductible by company for tax purposes Difference in treatment between diplomatic missions of foreign States to international organizations and officials of such organizations Whether constituting inequality of treatment Vienna Convention on Diplomatic Relations, Article 34 Application to international officials by analogy The law of Switzerland

Summary: The facts:In a dispute concerning the taxation of the capital of Residence Miremont, a Swiss property company, the applicable Swiss law provided that interest payable on debts owed by such a company was tax-deductible unless the creditor was not a taxpayer in Switzerland. One such debt was owed by Residence Miremont to a United Nations official of foreign nationality who was accredited as a diplomat. The tax authorities considered that the status of the official in question precluded him from being regarded as a taxpayer in Switzerland since he was exempt from taxes on income and property. The deduction of the interest was therefore disallowed. Residence Miremont lodged a public law appeal before the Federal Tribunal, arguing that it had been the victim of inequality of treatment contrary to Article 4 of the Swiss Constitution.

Held:The appeal was dismissed.

(1) It was argued that the Swiss tax authorities were guilty of inequality of treatment because they allowed the deduction of interest on debts owed by properly companies to the permanent missions of various States to the United Nations, whereas they disallowed such claims where the creditors were senior officials of international organizations. Even if such a practice were established it would not, of itself, constitute inequality of treatment. There was a substantial difference, based on the different legal character of States and international organizations under international law, between the position of the officials of such organizations and the position of the diplomatic mission of a foreign State accredited to such organizations. The distinction appeared sufficient to justify the grant of tax privileges to property companies where the creditors were foreign States, without extending those privileges to cases where the creditors were private individuals.

(2) Article 34 of I he Vienna Convention on Diplomatic Relations, 1961, required diplomatic agents to be granted exemption from taxation. Although they were not diplomatic agents, international officials were granted in Switzerland the benefit of the same advantages as those conferred under the Convention. Since the official in question had been treated as being exempt from taxation, there was no question of any violation of the Convention.

The following is the text of the relevant part of the judgment of the Court:

AThe Residence Miremont Inc Real Estate Corporation (hereafter the Corporation) is a tenant-shareholder real estate corporation whose tenant-shareholders are, at the same time, unsecured lenders of large sums of money to the...

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