VAT'S IMPORTANT - NEWSLETTER 2024 - 04
NEWSLETTER 2024 - 04
GAME OVER
The Swiss Federal Administration Court decided on the VAT qualification of online gambling
It took some time until the Court decided on the VAT qualification of online gambling. The key questions were the following ones:
Are the transactions considered to be a VATable supply of service?
If yes, can online gambling be qualified as electronically supplied service; in other words, is there any substantial human intervention.
FACTS OF THE CASE
The complainant, based in Malta, is active in the online sports betting sector. Following various exchanges of correspondence, instructions and meetings, the SFTA informed the taxpayer of the retroactive entry in the register of persons liable for VAT as of 1 January 2013. The complainant disputes its subjective tax liability in Switzerland in the absence of (taxable) services that it is said to have provided in Switzerland. The SFTA, on the other hand, is of the opinion that the complainant provided electronic services in Switzerland.
JUDGMENT A-4978/2022
First of all, the Swiss Federal Administration Court (SFAC) discusses whether the appellant actually provides services within the meaning of the VAT Law with the sports bets in dispute. According to the Court, the concept of consumable economic value shall be understood broadly and includes everything that in any way serves to satisfy a need or demand. In the case of a bet, the supply is to be seen in the granting of an opportunity to make a profit if an assertion proves to be true. The consideration lies in the betting stake, which the betting party has to pay in the event of the claim not being true. Accordingly, the complainant provides services with the sports bets in dispute.
The second question that had to be decided by the Court is whether there is enough significant human intervention to perform this service in order to qualify the supply as an electronically supplied service? According to the FAC, no human intervention could be required for the provision of the service in question, namely the granting of a suspensive and casually conditional possibility of achieving a profit that can be determined in advance if an assertion proves to be true. This is because the actual provision of the service is, according to its casually conditional nature, precisely outside the sphere of influence of the betting parties. Neither the bookmakers nor other support staff of the complainant exert any influence on the provision of the service after the bet has been placed. Their activities are primarily limited to preparatory actions such as the setting of betting odds, which are aimed at the conclusion of new bets and thus new potential service relationships. The Court states that these persons are not involved in the actual provision of the relevant VAT betting service, namely offering the betting participant the opportunity to achieve a predetermined profit (in accordance with the betting odds) if their claim proves to be true.
If, however, the support staff interacts with customers in order to negotiate whether a desired special bet can be included in the program or a bet not covered by the system can be placed, this interaction is according to the judgement also not part of the relevant service provision, but of the contract negotiations. If questions about unclear settlements or current sports results are answered or technical support is provided, this is normal support, which is usually associated with every service relationship and cannot be qualified as significant human intervention as part of the service provision. This applies all the more to the present case constellation, in which the outcome of the bet lies outside the sphere of influence of the betting parties. Therefore, the Court comes to the conclusion that no significant human intervention is being performed.
WHAT DOES THIS MEAN FOR ME AS AN ENTREPENEUR
After many years of insecurity, the court decided now on the VAT qualification of online gambling services from a Swiss perspective. It is our clear recommendation that companies shall proactively discuss their VAT qualifications with the SFTA before even starting the business activity in Switzerland.
We at terraVAT are happy to support you at any time; we are always at your disposal.
With best regards
Your terraVAT Team
Sabrina Frey Dr. Florian Hanslik
Senior Consultant Founding Partner
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