Overview of the tax law decisions of the Swiss Federal Administrative Court published in the weeks from 2 - 22 July 2018.

  • Judgment of 2 July 2018 (A-713/2017): Value Added Tax (VAT); refund of VAT from 1 January - 31 December 2012; the disputed issue was the refund of VAT under Article 107(1)(b) of the VAT Act to a GmbH established in Germany (appellant). Dismissal of the complainant's application for remuneration, since the life advice services provided by telephone were not attributable to the complainant but to a sole proprietorship domiciled in Switzerland (with which the complainant had business relations). Therefore, indirect representation is excluded under Art. 20(3) VAT Act (E. 3.3). The input tax refund procedure presupposes that the foreign customer receives services subject to VAT in Switzerland, which was not fulfilled in the present case, since the sole proprietorship did not provide services to the complainant but to third parties and should not have invoiced VAT due to the lack of a service to the complainant. According to administrative practice, input tax refunds are excluded if the service was erroneously invoiced with domestic VAT or if no domestic VAT would have been payable if the service or the place of performance had been qualified in conformity with the law (E. 2.6.2 and 3.4). Dismissal of the taxpayers' complaint.
  • Judgment of 2 July 2018 (A-416/2017): Withholding tax (reporting procedure); the admissibility of the reporting procedure for monetary payments in the 2010 and 2011 tax periods was disputed. In the 2010 and 2011 tax periods, the complainant had made monetary payments to the 59% indirectly held (via two other group companies) grandparent shareholder A, which he had not fully declared in his 2010 and 2011 tax returns. The grandparent shareholder declared CHF 10,000 private share in each of the two tax periods, although in the tax period 2010 monetary benefits totalling CHF 41,600 and in the tax period 2011 monetary benefits totalling CHF 35,775 were identified. The complainant took the view that the proper declaration of the monetary benefits had been made and that purely arithmetical corrections pursuant to STS No. 40 of the FTA would not yet lead to a forfeiture of the claim for restitution. The Federal Administrative Court considered that a purely arithmetical correction should be denied, since the private shares, which are always declared in the same way, would not correspond to the differently determined and described monetary benefits and did not take into account significant changes (E. 5.3.1). As the forfeiture of the claim for restitution could not be excluded, the Federal Administrative Court, following the lower instance, only approved the notification procedure for the private units declared in each case for CHF 10,000; withholding tax plus default interest was due on the remaining monetary benefits. Dismissal of the taxpayers' appeal.

Decisions of the Federal Administrative Court in the area of administrative assistance:

  • Judgment of 29 June 2018 (A-5859/2017): Administrative assistance (DTA Switzerland - Netherlands); the provision of administrative assistance for the correct levying of Dutch income tax on the complainant based on the DTA CH-NL was disputed. The complainant alleged that the FTA had infringed his right to be heard by not granting him full access to the file in the proceedings at first instance. The Federal Administrative Court confirmed the breach of the obligation to provide guidance on the file situation arising from the right to inspect files, since the FTA did not inform the complainant of the inclusion of the file items stored solely on the USB stick submitted for consultation. However, this deficiency was remedied, since the wrongly refused inspection of the files was granted retrospectively and the complainant was given an opportunity to comment. Since the Federal Administrative Court has comprehensive cognition in the factual and legal questions that have arisen, the complainant has the same rights of participation as before the FTA and a rejection on the grounds of a violation of the right to be heard would lead to a formalistic idleness and unnecessary delays, it is not practical to reject the application to the lower instance in order to cure the deficiency. This applies regardless of the severity of the hearing impairment (E. 5.1.2). The Federal Administrative Court considered the complainant's further submissions that the object and tax purpose of the request had not been sufficiently defined, that the principle of subsidiarity had not been observed and that the presumed materiality was not given, to be insufficiently substantiated. Dismissal of the taxpayer's appeal.
  • Judgment of 7 June 2018 (A-2454/2017): Administrative assistance (DTA Switzerland - India); the provision of administrative assistance based on the DTA CH-India concerning company X (appellant) was disputed. The Indian Ministry of Finance (MoF) suspected that the complainant had laundered her own money for reasons set out in more detail in the request for administrative assistance. It argued that although the assessment procedure in India had already been completed and the statute of limitations had come into effect, criminal proceedings had now been initiated under Indian income tax law. It claimed that the information requested was useful in the criminal proceedings and also in other proceedings concerning the Indian Income Tax Act. The FTA concluded that it would provide administrative assistance to the MoF to the extent requested and the Company filed an appeal with the Federal Administrative Court. In accordance with the considerations of the Federal Administrative Court, the DBA CH-IN contains two significant deviations from the OECD-MA: on the one hand, Art. 26 DBA CH-IN refers to the fact that administrative assistance is only provided for taxes covered by the agreement; on the other hand, Art. 2 DBA CH-IN explicitly excludes interest and penalty taxes from the scope of the agreement (E. 2.1.4.1). Thus, based on Art. 26 DBA CH-IN, administrative assistance may not be provided solely for the prosecution of money laundering and the MoF must be referred to the route of international mutual assistance in criminal matters (E. 3.1). In addition, in response to a clearly formulated request by the FTA, the MoF was unable to sufficiently explain why the information was still significant despite the statute of limitations and for which further proceedings the requested information would be used. Consequently, the MoF may not be granted administrative assistance (E. 3.8). Approval of the taxpayers' complaint. The decision was appealed to the Federal Supreme Court.

Decisions are listed chronologically by publication date.

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