Current VAT problems (2017)

Case 1: Community tax liability before / after the partial revision of the VAT Act

Facts

The Werkhof (W) department of the municipality X achieves the following turnover from the construction work performed:

Questions

Is the Werkhof (W) department of the municipality X subject to compulsory VAT on the basis of the above turnover from construction work?

• with the currently applicable law,
• after the entry into force of the changes pursuant to the partial revision of the VAT Act?

Case 2: Gym

Facts

Florian F., Gabriela G. and Hans H. each hold a 33.33% share in Studio for Fitness GmbH, which operates the "Studio for Fitness" in Lucerne. The annual turnover of the GmbH amounts to approximately CHF 750,000; the company accounts for VAT in accordance with agreed fees.

The three owners of the gym each have different commitments:

Gabriela G. runs the company as managing director and is 100% employed by Studio for Fitness GmbH. According to her employment contract, her field of activity includes, in addition to the management, the provision of an average of 10 hours per week of personal fitness training for individuals or groups of two.

Florian F., who is currently still undergoing further training, is 50% employed by Studio for Fitness GmbH. According to his employment contract, he takes over the supervisory function for 15 hours per week; for another 5 hours he gives group trainings (e.g. spinning) in the studio. If required he also carries out individual trainings. It has been agreed between the shareholders that Florian F. collects the fees for these hours directly from the clients (usually in cash). He declares the corresponding income in his personal tax declaration as income from self-employment.

Hans H. is also 50% employed by Studio for Fitness GmbH. In addition, he gives individual trainings as a sole trainer. For this purpose he has rented a small room in Emmen, but occasionally his customers prefer to do the training sessions in the Studio for Fitness. In this case Hans H. pays the GmbH a small rent per hour, for the use of the infrastructure by him and his customers. As a sole trader, his turnover is significantly less than CHF 100,000 per year, and he is not entered in the register of VAT-liable persons.

In order to meet the time requirements of the clients as much as possible, Gabriela G., Florian F. and Hans H. regularly help each other out by "taking over" hours. In order to make this as efficient as possible for the clients, a list of available training hours is available at the reception desk for clients to sign up for. Since the three trainers have a similar training approach, customers tend to be neutral with regard to the training person - they are guided by the time availability.

Questions

1. How is the situation of the four persons involved in the facts described (Studio Fitness GmbH and its three participants) to be assessed from the point of view of the subjective VAT obligation?
2. What VAT "pitfalls" have to be considered with regard to Hans H.'s sole proprietorship and how can they be appropriately addressed?

Case 3: Community services exempted from VAT before / after the partial revision of the VAT Act

Facts, case 3a

The Werkhof (W) department of the municipality X achieves the following turnover from the construction work performed:

Questions

The services provided by the Werkhof (W) office of the municipality X and the (obligatory) tax liability based on the turnover from construction services are to be assessed,

• with the currently applicable law,
• after the entry into force of the changes pursuant to the partial revision of the VAT Act.

Facts of the case, case 3b

The Werkhof (W) department of the municipality X achieves the following turnover from the construction work performed:

Questions

The services provided by the Werkhof (W) office of the municipality X and the (obligatory) tax liability based on the turnover from construction services are to be assessed,

• with the currently applicable law,
• after the entry into force of the changes pursuant to the partial revision of the VAT Act.

Facts, case 3c

The special-purpose association "Forst der Gemeinden X + B" generates the following revenues from the forestry services it provides:

Questions

The services provided by the special-purpose association "Forst der Gemeinden X + B" and the tax liability based on the turnover achieved must be assessed,

• with the currently applicable law,
• after the entry into force of the changes pursuant to the partial revision of the VAT Act.

Facts, case 3d

The special-purpose association "Forst der Gemeinden X + B" generates the following revenues from the forestry services it provides:

Questions

The services provided by the special-purpose association "Forst der Gemeinden X + B" and the tax liability based on the turnover achieved must be assessed,

• with the currently applicable law,
• after the entry into force of the changes pursuant to the partial revision of the VAT Act.

Case 4: Retrospective transfer of VAT

Facts

Services AG, based in Schaffhausen, provides various services to customers in Switzerland and abroad. It also provides services to Group companies based in Switzerland and Germany. Invoices for foreign countries are issued in EUR, those for domestic customers in CHF.

In 2016, the FTA carried out an audit at Services AG for the tax periods 2011 to 2015, in the course of which it made the following offsets:

Due to a processing error, the invoicing for services that were taxable domestically in accordance with Art. 8 para. 2 was systematically carried out without VAT in 2011 and 2012 if these services were invoiced to foreign recipients. Due to this erroneous application of Art. 8 para. 1 VAT Act, no tax was declared in the VAT statements for these two years. This error was corrected as of 1 January 2013. The VAT inspector calculated the back tax as follows (the currency conversion was carried out at an estimated annual mean rate, based on the monthly mean rates of the FTA; tax is "deducted")

In 2014, invoices to domestic service recipients were erroneously invoiced without VAT for three months (January to March 2014) due to an incorrect manipulation in the programming of the invoicing system. This led to the following offsets (tax "eliminated"):

In addition to the back taxes, the FTA charged interest on arrears for the respective amounts.

The financial managers of Services AG now turn to you as a tax advisor. In particular, they are disturbed by the fact that - in the event of correct processing during the period of service/invoicing - neither Services AG nor the service recipients would have incurred any tax or interest charges and ask you whether there is "still something to be done".

Questions

1. What possibilities are there for Services AG to reduce the tax burden resulting from the offsets for the years 2011 and 2012?
2. How can the tax burden from the offsets for 2014 be alleviated?
3. Does Services AG have an argumentation to avoid or reduce the default interest burden?

Case 5: Margin taxation on collectibles instead of deduction of fictitious input tax

Facts and circumstances 5a

The taxable Galerie Modern GmbH sells paintings, some of which it acquired directly from painters, and some of which it acquired from other non-taxable persons who did not create these paintings themselves.

Questions

The tax to be delivered by Galerie Modern GmbH on balance on the basis of the above information is to be assessed:

• with the currently applicable law,
• after the entry into force of the changes according to the partial revision.

Situation 5b

When selling new vehicles, Autohandels AG Zurich often accepts payment for used vehicles from non-taxable customers. The company deducts a fictitious input tax on these vehicles taken in payment in accordance with Art. 28 para. 3 VAT Act. It would like to know from you what the deduction of a fictitious input tax will look like after the partial revision comes into force. The AG achieved the following turnover with the sale of used vehicles that it acquired from non-taxable persons.

Questions

Which purchases ultimately entitle to a deduction of notional input tax pursuant to Art. 28 para. 3 or Art. 28a VAT Act:

• with the currently applicable law,
• after the entry into force of the changes according to the partial revision?

Case 6: Holding company

Facts

ABC Holdings AG, a subsidiary of a Dutch holding company, is part of the listed US ABC Group. Until now, ABC Holdings AG has served as a pure intermediate holding company through which Group companies in around 20 countries were held, including various operating companies in Switzerland. In the balance sheet as at 31.12.2016, the assets (mainly participations) are valued at CHF 500 million.

ABC Holdings AG has its address at one of the Swiss companies (ABC Vertriebs AG) and does not have its own staff. It is exempt from subjective tax liability on the basis of Art. 10 para. 2 let. a MWSTG, and the exemption has not yet been waived (Art. 11 MWSTG).

The FTA has announced an inspection at the VAT-liable ABC Vertriebs AG for March 2017. The responsible official has already indicated that he also wishes to inspect the documents relating to ABC Holdings AG during his inspection.

Question

1. What VAT questions arise for ABC Holdings AG?
2. Are subsequent charges to be expected due to the control of ABC Holdings AG?