Decisions of the Swiss Federal Administrative Court (CW 33–2026)

Overview of the tax law decisions of the Swiss Federal Administrative Court published between August 10 and 16, 2026:

Judgment of August 6, 2026 (A-2961/2026): Value-Added Tax 2016 through 2020; Scope of partial res judicata; Recusal in the objection proceedings; Input tax deduction when offsetting third-party prices among closely related parties; Input tax adjustment due to mixed use (revenue allocation formula; inclusion of material costs). The Federal Administrative Court ruled, on procedural grounds, that while the Federal Tax Administration (FTA) had correctly established res judicata in its objection decision regarding revenue differences, it had not done so with respect to the input tax adjustment. However, the taxpayer’s objection that the FTA had been biased in the objection proceedings because the objection was handled by the same case officer as the tax assessment was unfounded. By law, the objection proceedings are adjudicated by the same authority (no devolutive effect). Art. 59 of the Administrative Procedure Act (VwVG) is not applicable, and even based on Art. 10(1)(c) VwVG, no bias can be assumed. On the merits, the Federal Administrative Court reached the following conclusions: A closely affiliated foundation provided office space to the taxpayer (a limited liability company). The foundation opted for the tax treatment but did not charge the taxpayer the full third-party price. Although the ancillary costs were billed, the tax was not itemized. The Federal Tax Administration (FTA) adjusted the revenue differences for the foundation but denied the taxpayer the right to deduct input tax because the tax was neither passed on (billed) nor paid. The FTA did, however, point out the possibility of a subsequent pass-through. The Federal Administrative Court did not take issue with this. The foundation then entered into a service contract with a municipality regarding the reintegration of social assistance recipients into the workforce. However, the foundation delegated the implementation to the taxpayer, who invoiced the municipality directly. It was no longer disputed before the Federal Administrative Court that the taxpayer thereby provided a service to the foundation in exchange for consideration that was exempt from tax (Art. 21(2)(8) of the Value-Added Tax Act; classification of the service based on the service contract, not the direct invoicing). The Federal Administrative Court (BVGer), however, concluded that the Federal Tax Administration (ESTV) had wrongly determined the consideration using the cost-plus method plus a 10% surcharge for overhead and profit, thereby increasing the tax-exempt consideration. The foundation had agreed on a third-party price with the municipality. The taxpayer could rely on this price as a third-party price (Art. 24(2) of the VAT Act). Consequently, the sales allocation key used to determine the input tax adjustment due to mixed use had to be reduced in favor of the taxpayer. The taxpayer ultimately employed social assistance recipients to perform various paid tasks in the taxable sector. She fully deducted the input tax on the material expenses required for this purpose (Pool A). The FTA, on the other hand, included this input tax in the input tax adjustment due to mixed use based on the revenue allocation formula (Pool C). This approach is upheld by the Federal Administrative Court. The employment of social assistance recipients in the taxable sector is also a prerequisite for fulfilling the tax-exempt service mandate. Partial granting of the taxpayer’s appeal.

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