VAT'S IMPORTANT - NEWSLETTER 2024 - 01
NEWSLETTER 2024 - 01
Claiming back input VAT in Switzerland
Federal Supreme Court ruling 9C_154/2023
WHAT IS IT ABOUT?
When can input VAT be claimed back? In principle, when an invoice is issued to a company registered for VAT in Switzerland, the VAT paid can be claimed as input tax. So far so good.
But what happens if the service described in the invoice also relates to a period in which the recipient was not yet registered for VAT? How and to what extent is an input tax deduction possible? The Federal Supreme Court explained this in its recently published ruling 9C_154/2023.
FACTS OF THE CASE
The taxable person declared input VAT in 2019. The FTA requested the taxpayer to submit all copies of invoices relating to the declared input tax and other documents. The FTA then determined that the taxpayer claimed the declared input tax in full, even though the supplies received were deemed to have been partially or fully consumed for VAT purposes before the start of the tax liability.
JUDGMENT
In its ruling, the Federal Supreme Court explains that it would have been up to the appellant to show that and why it was constitutionally untenable to assume that the services were provided "evenly over the service period" - as argued by the tax administration and the Federal Administrative Court. It had not done so. In particular, it had failed to submit a project plan, for example, or to prove in which specific time or period the consultants had provided which specific services. At the same time, the Federal Supreme Court emphasized that this could not be blamed on the FTA. The burden of proof lies exclusively with the taxpayer. Accordingly, in the opinion of the court, the tax administration had to find at least a plausible approach. The pro rata temporis methodology by the FTA was not objected to by the court.
In this case, the taxpayer wants to bring about the removal of taxation by means of contribution taxation. The court questions whether the consultancy services received have a value in use in themselves that can be capitalized as such. However, the decisive factor here is Art. 72 para. 2 sentence 2 Swiss VAT Ordinance of 2009: This stipulates that services in the areas of consulting, accounting, recruitment, management and advertising are presumed to be consumed and no longer available at the time they are purchased. In the present context, the complainant would therefore have to prove, by means of evidence to the contrary, that the general-abstract presumption did not arise in the specific individual case. It would have had to assert and prove that and why the services received actually had a concrete utility value "beyond the day". It was unable to do so. The complaint was therefore rejected.
WHAT DOES THIS MEAN FOR ME AS AN ENTREPRENEUR?
As we all know, VAT should only be charged on the non-business final consumption. Businesses should not bear the financial burden of VAT. It is essential to emphasize that the VAT liability is a condition for any input VAT deduction. The obligation to pay VAT begins with the start of a business activity. It is absolutely essential to check whether this condition actually exists in order to avoid any unpleasant surprises in advance.
We at terraVAT will be happy to support you at any time;
please do not hesitate to contact us.
With kind regards
Your terraVAT Team
Sabrina Frey Dr. Florian Hanslik
Senior Consultant Founding Partner
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