Decisions of the Swiss Federal Administrative Court (CW 39 - 2023 )

Overview of tax law decisions of the Swiss Federal Administrative Court published between September 25 - October 1, 2023:

Judgments of 8 September 2023(A-5710/2022 and A-5712/2022): VAT, input tax deduction 2014-2018; A. AG was denied the input tax deduction on the purchase of construction services from the sole proprietorship X. for lack of proof of the effective payment of the input tax; in the proceedings, A. AG was still unable to provide such proof; the proofs of payment submitted did not show A. AG (but its sister companies) as the owner of the debit accounts; dismissal of A. AG's appeal.
Judgment of September 18, 2023 (A-1446/2023): Radio and television fees; household tax. The complainant submitted an opting-out request for exemption from the household fee, as he neither watches television nor listens to the radio. The lower court rejected the request because the complainant owned a multifunctional device. Persons who receive benefits according to the ELG can be exempted from the tax upon request. According to the applicable guideline of the Swiss Conference for Social Welfare (SKOS), the basic subsistence needs include the expenditure item "Communication, Internet, Radio/TV". An exemption from the levy for recipients of social assistance was expressly rejected by the legislator and the Federal Council. Dismissal of the complaint of the person liable for the levy.
Judgment of September 4, 2023 (A-4976/2022): Withholding tax (pecuniary benefit); the complainant A. AG is active in the field of asset management. For direct tax purposes, A. AG accepted profit offsets as a result of excessive remuneration for financial services provided by B. Ltd and C. AG in 2015 and 2016; for withholding tax purposes, A. AG contested the existence of imputed income. AG contested the existence of pecuniary benefits, inter alia because there was no relationship with a related party. The FAC dealt in detail with the obvious disproportion between performance and consideration and held that the FTA had not properly determined the third-party price. Since the companies employed partly the same employees, the FTA saw the disproportion in the fact that the same employee at A. AG earned CHF 60/hour, while the financial services were invoiced by C. AG / B. Ltd with considerably higher hourly rates of CHF 300/hour, among others. A. AG would therefore have indirectly "purchased" the services of its own employees again at a significantly higher price, which is why it would have been significantly more favorable for it not to outsource the services to B. Ltd / C. AG. The BVGer rejected this view of the FTA on the basis of entrepreneurial freedom. According to the FAC, contrary to the view of the FTA, there is also a hierarchical relationship in the application of the transfer pricing methods, the FTA must first examine the application of the comparable price method (CUPM) and only in the absence of an effective third party comparison can the third party comparison be made according to other transfer pricing methods in accordance with the OECD Transfer Pricing Guidelines. However, the cost-plus method applied by the FTA is less suitable for financial services. Whether the companies were related parties could be left open in view of the third-party prices to be examined (however, according to the FAC, there were various indications that this was the case). The appeal of A. AG is upheld insofar as the matter is referred back to the FTA for further clarifications regarding the third-party price and for a new objection decision.
Judgment of 13 September 2023 (A-4948/2022): VAT; provision of vehicles 2012-2016): The complainant (A. AG) had deducted input taxes in connection with the acquisition or leasing of various vehicles. According to the FTA, these vehicles had been made available to the shareholder and sole shareholder B. for private use, which is why the FTA had made an additional charge. An indication for making the vehicles available is the comprehensive discretionary power of a managing director and shareholder of a stock corporation controlled by him. It is true that B. had to move the vehicles regularly in order to prevent stationary damage or to bring them to exhibitions. Nevertheless, the FAC concluded that due to the frequent and permanent availability and intensive use (100,000 kilometers driven per year) of the vehicles by B., it must be assumed that they were available to him (and any persons close to him) for their sole use and that the sale or trade was not the primary purpose. Dismissal of the taxpayer's appeal.

Administrative assistance (incl. updates/re-publications):

Intermediate dispositions