VAT'S IMPORTANT - NEWSLETTER 2023 - 03
NEWSLETTER 2023 - 03
Contribution under public law versus donation
The Swiss Federal Supreme Court defines the above in its ruling of June 13, 2023 (9C_609/2022)
WHAT IS IT ABOUT?
While the contribution under public law has an effect on input tax recoverability (input tax reduction), a donation does not lead to any input VAT reduction. The Swiss Federal Supreme Court (FSC) compared the differences between a contribution under public law and a donation.
DEFINITION OF CONTRIBUTION UNDER PUBLIC LAW
According to the FSC, a contribution under public law is characterized by a contribution from a subject of public law or, more generally, from a "public task bearer". The contribution under public law is made with a clear intention to support: the subsidizing community is primarily concerned with providing financial support to the person receiving the contribution or to the services provided or to be provided by that person in order to achieve economic, regional policy, structural policy or other public law objectives.
DEFINITION OF A DONATION
The FSC states that a donation is a voluntary donation with the intention of enriching the recipient without the expectation of a consideration in the sense of VAT law. In principle, the beneficiary is not subject to any legally standardized behavioral obligation, apart from the fact that he or she "mentions the donation in a neutral form once or several times" in a publication. With this minor restriction, the beneficiary obtains the funds for free disposal.
CONCLUSION
In the present case, the expectations on the part of the Canton of Zurich inevitably had to go further, as considerable public funds were at stake, which had to be used economically and in a targeted manner. In the view of the FSC, the canton of Zurich associated its investment with the prospect of supporting a project that made sense in terms of health policy and of gaining prestige among experts. Such an approach was typical for the award of public contributions based on purely political discretion. It could not be imputed to the Canton of Zurich that it had approved the funds and left their use largely up to the taxpayer. The focus was that the contribution should contribute to the realization of a public purpose.
Based on the above, it is essential to qualify the transaction correctly upfront. As described beforehand, the implications might be immense as input VAT can either be claimed back – or not. We at terraVAT are always supporting an open discussion with the SFTA upfront via a written ruling request as this may minimize sleepless nights.
If you have any questions, please do not hesitate to contact us.
Your terraVAT team is happy to assist.
With best regards
Your terraVAT Team
Sabrina Frey Florian Hanslik
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