VAT'S IMPORTANT - NEWSLETTER 2025 - 02
NEWSLETTER 2025 - 02
VAT EXEMPT SUPPLIES TO INTERNATIONAL AIRCRAFTS
It was disputed in front of the Swiss Federal Supreme Court whether ground handling services were exempt from tax and whether the mineral oil tax exemption was a subsidy. In its ruling 9C_299/2024 of December 19, 2024, the Swiss Federal Supreme Court ruled that a narrow understanding of the exemption violated federal law. It also came to the conclusion that the mineral oil tax exemption does not constitute a subsidy, as aircraft fuels are not taxed due to the provisions of the international treaty (Chicago Convention).
Summary
In its ruling, the Swiss Federal Supreme Court first evaluates the interpretation of the VAT treatment of supplies to international aircrafts in the EU and its implementations, in particular in Germany and Austria. The Swiss Federal Supreme Court concludes in its evaluation that the European Court of Justice does not have a narrow understanding. For the European Court of Justice, it is sufficient that there is a connection with the service provided and the normal operation of the carrier. However, it does not require that the service is only exempt from tax if it directly serves to travel from A to B with its cargo.
Supplies and goods to aircrafts
According to the Swiss Federal Supreme Court, a narrow understanding also contradicts the Swiss Federal Tax Office’s (SFTA's) practice. The FTA does not interpret the phrase “supplies of goods for the provisioning of these aircraft” not in the sense that it must be exclusively about supplying the aircraft itself so that it can fly from A to B (e.g. delivery of fuel), but rather includes, for example, the delivery of in-flight catering or “newspapers and magazines provided in the aircraft”, although these are used exclusively to supply the passengers. In this respect, it is not clear why the “provision of supplies to aircraft” should also include the provision of supplies to passengers on board, but “services for the direct needs” of the aircraft should not include services that ensure that passengers can board the aircraft at all. Finally, the purpose of the provision is to favor international aviation. The tax exemption results in reduced administrative burdens for international aviation companies because they do not have to keep records or evidence for input tax purposes. In summary, services are deemed to be intended for the direct needs of an aircraft and its cargo if they are sufficiently closely related to the usual operation of the aircraft.
Is mineral oil tax a subsidy?
Lastly, it remained to be examined by the Swiss Federal Supreme Court whether the exemption from the mineral oil tax should be qualified as a subsidy for VAT purposes and whether the applicant's input tax deduction should therefore be proportionately reduced. The Swiss Federal Supreme Court states that the Swiss authorities have repeatedly stated in the past that they would like to tax aircraft fuel. However, it should be noted that aircraft fuels are not taxed only because the relevant provisions of international law (Chicago Convention) provide for this. Accordingly, under these circumstances, it cannot be said that there is a subsidy. The conditions are therefore not met and the reduction of the input tax deduction proves to be inadmissible.
It is interesting to see how the Swiss Federal Supreme Court is also aligning itself with the decisions of the European Court of Justice – and rightly so, since Switzerland cannot be considered an island, especially in the field of aviation.
We will be happy to assist you with any questions you may have in the area of VAT.
Your terraVAT team
Sabrina Frey Dr. Florian Hanslik
Manager Founding Partner
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