Current VAT problems (2019)

Case 1: Input tax deduction for demolition and dismantling work and soil remediation

Facts

X AG is subject to value added tax and accounts effectively. To date, it has opted to rent out a commercial property in Zug, which it has constructed itself.

The commercial property is now to be demolished and a residential property is to be built after a soil decontamination.

Can the input taxes on the demolition and soil remediation costs be deducted by X AG?

Variant 1

X AG sells the commercial property to Y AG, which is subject to VAT. The latter is now demolishing the property after the purchase, renovating the ground and creating a residential property.

variant 2

X AG demolishes the commercial property and sells the land after soil remediation to the VAT-liable Y AG, which builds a residential property on it.

Variant 3

X AG sells the commercial property with an option to the VAT-liable Y AG, which continues to rent it optionally (the existing rental agreements are taken over by Y AG). After one year, Y AG demolishes the property, renovates the ground and builds a residential property.

Variant 4

The property rented out so far is a residential property and now X AG wants to demolish the property, renovate the ground and build a commercial property, which it will rent out optionally.

Variant 5

The property, which has been rented out to date, is a residential property. X AG is selling it to Y AG. Y AG demolishes the property after purchase, renovates the ground and builds a commercial property, which it optionally rents out.

Variant 6

The property, which has been rented out to date, is a residential property. X AG demolishes the property and sells the land to Y AG, which is liable to VAT, after soil decontamination.

Variant 7

X AG would like to rent out the premises of the commercial property as lofts. The building will remain as it is, only some constructional measures will be carried out within the premises (the corresponding building applications have been submitted).

Can input taxes on these construction measures be deducted?

Case 2: Aggregates and combinations of services

Situation 1

Software company X., which is domiciled in Switzerland, offers the foreign Y. company to develop new software for its special machines. In addition, it will also develop the software at the three subsidiaries of Y. - namely Y1. AG (CH), the Y2. BV (NL) and Y3 GmbH (D) - will implement the software. The lump-sum price for this development including implementation should be EUR 3 million (internal calculation: EUR 2.6 million for development; EUR 0.1 million each for implementation at the parent company and the three subsidiaries).

Are the EUR 3 million taxable in Switzerland?

Situation 2

The Hotel Seeblick in Stein am Rhein (SH) offers an extended family weekend for four people at a package price of CHF 2'780. The package includes

• One overnight stay in the Family Suite (incl. breakfast),
• a bus trip to the Rhine Falls including dinner
• a boat trip to Bregenz (AUT) and back
• the entrance fee for the Bregenz Festival;
• two nights in a family suite (incl. breakfast) in the Bregenz partner hotel "Lakeview" and
• a guided city tour in Bregenz.

According to the hotel's internal calculation, the all-inclusive price is made up as follows:

• Overnight stay including breakfast (Hotel Seeblick): CHF 700
• Bus ride including dinner: CHF 200
• Navigation: CHF 250
• Admission to the Bregenz Festival: CHF 590
• Two nights incl. breakfast (Hotel Lakeview): CHF 900 Guided city tour: CHF 140

Which services (and at what rate) does Hotel Seeblick have to pay tax on in Switzerland (tax-optimal solution)?

Situation 3

Taxi operator Anton, based in Bregenz (AUT), brings several passengers from Austria to Zurich-Kloten airport every day. The proportion of kilometres driven in Switzerland is less than 30% in relation to the total kilometres driven per order.

Can Anton apply the 70/30% rule?

Excursus: Due to the good order situation, Anton rents a taxi with a chauffeur from Franz, a taxi company also located in Bregenz.

Does this "letting" have VAT consequences for Franz?

Case 3: opting in

Facts

The University of Applied Sciences X, an association based in Schaffhausen, the business year is the calendar year, is VAT-registered in Switzerland and accounts effectively. The University of Applied Sciences is active in the field of adult education.

For its services in 2018, the University of Applied Sciences has not shown any VAT on the invoice and has not invoiced any VAT.

Can the university of applied sciences tax these services retroactively with an option and claim the related input taxes?

Variant 1

In 2018, the University of Applied Sciences X. has shown the VAT on the invoices and also settled it.

Can it reverse the selection at a later date?

variant 2

In 2018, the University of Applied Sciences X. showed the VAT on the invoices but did not settle it.

What are the consequences and can the option be reversed afterwards?

Variant 3

In 2018, the University of Applied Sciences X. did not show the VAT on the invoices, but taxed it in the VAT statement.

What are the consequences and can the option be reversed afterwards?

If it wishes to maintain the option, can it still show the VAT on the invoices?

Case 4: Distance selling scheme

Situation 1

Since 2015, the Chinese Internet mail-order company X. has been offering goods at a very low price (usually less than CHF 50) via its X.-Store Internet platform. The goods ordered on the platform are sent by post. X.'s turnover has grown steadily over the last few years. It is expected that the turnover of X. will exceed the CHF 100'000 threshold during July 2019.

How have the goods of X been registered for VAT in Switzerland up to now? Will X be taxable in 2019? When does he have to be entered in the register of persons subject to VAT with the ESTV?

Situation 2

A domestic major distributor Cogros, registered in the VAT register, offers a photo service. If you have your photos developed at Cogros, the file is sent to Picfun, a photo developer based abroad, who develops the pictures and delivers them directly to the domestic customer on behalf of the distributor.

In the present case, who becomes liable to VAT on the basis of the mail-order deliveries to domestic customers as a result of the mail-order trade arrangements? With what consequences?

Case 5: Tax liability of foreign companies

Facts

Tax Consulting GmbH has its registered office in Munich. It is active in the field of tax consulting. So far, it has achieved annual sales of CHF 1 million from clients in Germany and CHF 0.5 million from clients in Austria.

It now has customers from Switzerland who are subject to value added tax. Initially, the turnover is CHF 50,000 per year.

How are sales in Switzerland to be settled for VAT purposes?

Variant 1

Tax Consulting GmbH now also has a private client in Switzerland, to whom it provides consulting services amounting to CHF 5,000 per year.

variant 2

Once a year Tax Consulting GmbH organises a customer event in Zurich on the subject of "Innovations in German tax law". The entrance is free of charge.

Variant 3

Once a year Tax Consulting GmbH organises a customer event in Zurich on the subject of "Innovations in German tax law". Admissions amount to CHF 2'000.

Variant 4

For a small fee of EUR 30 per year, Tax Consulting GmbH provides its clients with access to its database on the summary decisions of the ECJ. The fees for Swiss clients amount to EUR 120 per year.

Variant 5

Tax Consulting GmbH provides its services to clients in Switzerland through a permanent establishment in Zurich.

Variant 6

Tax Consulting GmbH is held by TC AG, a holding company based in Zug, in addition to other foreign sister companies. TC AG has no personnel. It only generates income from the dividends of the subsidiaries.

Variant 7

After the ISIS seminar on corporate tax law in 2019, Ralf Imstepf and Roger Rohner, both resident in Zurich, urgently need a vacation. They book an all-inclusive hotel resort in Punta Cana (Dom. Rep.). For the use of the W-Lan during their stay, the hotel will invoice them separately for USD 20.

Case 6: Services between closely related persons

Situation 1

M. AG holds two investments of 30% each in the share capital of T1 AG and T2 AG. T1 AG is the owner of an IP right which it makes available free of charge to M. AG and T2 AG for use.

What are the VAT consequences of this provision?

Situation 2

The purpose of the A. Foundation is to promote medical-biological research. The foundation was established by the pharmaceutical company A. AG. The A. AG provides administrative services to the A. Foundation.

Do the services have to be taxed at the third price?

Situation 3

Basic facts: Carpenter S. is a member of the V. Association. For the construction of a soccer house, S. AG, which he controls 100%, provides the association with wooden slats free of charge.

What are the VAT consequences of this provision?

Variant: Because of the wooden slats, S. AG is mentioned in the next matchbook with praise.

What are the VAT consequences?

Situation 4

The S. AG has established the "Wohlfahrt S." foundation. It provides so-called "discretionary benefits" in old-age, survivors' and disability provision or other support benefits with a comparable purpose (e.g. AHV and other bridging pensions, one-off death benefits, accident benefits) to the employees and pensioners of S. AG in the cases specified in the articles of association.

The S. AG takes over the administrative tasks of the foundation free of charge. What are the VAT consequences?