Current VAT problems (2018)
Workshop on the occasion of the ISIS) seminar on June 4/5, 2018 on the topic "Current problems and perspectives of corporate tax law".
Case 1: Power combinations across the border
Carunternehmung Reiselust AG, based in Zurich, owns several cars and runs various tours in Switzerland and abroad.
Reiselust AG will be pleased to advise you on the VAT treatment of the following round trip "Europe". It would like to know from you which services are subject to tax, which are exempt from tax and which are, in fact, for the tours carried out in 2017 and those planned for 2018.
The following information is available from Reiselust AG:
Round trip "Europe": Zurich - St. Moritz - Venice (2 nights incl. city tour/boat trip) - Monaco - Lyon - Paris (2 nights incl. city tour and entrance to Eiffel Tower) - Brussels (2 nights incl. visit to EU headquarters) - Karlsruhe - Interlaken (2 nights; optional excursion Jungfrau-Joch CHF 100) - Zurich. Duration of the trip 13 days, 12 nights in very good hotels, package price incl. half board/excursions CHF 4'200.00. The whole trip covers about 3'400 km, of which about 550 km are inland.
According to the detailed calculation of sales prices, 40% of the tour offered at the all-inclusive price is accounted for by the journey, 55% by half board (dinner, accommodation with breakfast) and the remaining 5% by the city tours and excursions. The share attributable to half-board in Switzerland, including the profit surcharge, amounts to CHF 680.
How did Carunternehmung Reiselust AG offer this all-inclusive European tour
- in 2017
- in 2018
Case 2: Notional deduction
Gamezone AG, based in Zurich, sells games for PCs and game consoles in its games shops throughout Switzerland. It is subject to value-added tax and uses the effective method of accounting.
She buys the games - whether used or new - also from customers, who can have them credited against the purchase of games in the gameshops.
About 90 percent of the games purchased by Gamezone AG are resold in its stores, 9 percent are exported abroad on order and 1 percent are used for demo purposes in the stores and then raffled off.
To what extent can Gamezone AG deduct the input tax on the purchased games
- in 2017
- in 2018
Case 3: Exemption from tax liability
Franzen GmbH, based in Zermatt, is a specialist in natural hazards. For several years now, it has been working on behalf of the public authorities on geological investigations into possible rockfalls and debris flows in connection with the problem of permafrost and has been mapping the results in hazard maps. Since its foundation, Franzen GmbH has been active exclusively abroad, initially mainly in the French Alps (client municipalities in France), and in the last three years in Nepal and Tibet (Himalayan region) for local clients. Franzen GmbH employs five people. Three of them are mainly working abroad, two in Zermatt, where the hazard maps are produced on the basis of the knowledge gained by the three persons.
Franzen GmbH is not registered as a taxable person for VAT purposes, as the place of its services is abroad (Art. 8 para. 2 let. f MWSTG). The turnover generated from these geological surveys is between CHF 2.0 and 2.5 million per year.
The long-standing trustee has sold his trust company for reasons of age. When preparing the annual financial statements for 2018 in spring 2019, his successor noticed that Franzen GmbH also needed services from local consultants in order to fulfil its orders. Among others for the following:
- Consultancy services provided by non-taxable lawyers domiciled abroad with regard to work permits, insurance of one's own persons, but also the employment of local companies, e.g. the obligation to hire appropriate mountain guides and porters
Year 2015 Fr. 26'260
Year 2016 Fr. 33'700
Year 2017 Fr. 39'500
Year 2018 Fr. 34'100
- Accompaniment by independent local mountain guides and porters
Year 2015 Fr. 18'900
Year 2016 Fr. 22'400
Year 2017 Fr. 25'500
Year 2018 Fr. 24'800
- Online map material via Internet Nepal/Tibet from non-taxable service providers based abroad
Year 2015 Fr. 2'100
year 2016 Fr. 800
year 2017 Fr. 1'700
year 2018 Fr. 1'950
There are value added tax consequences for Franzen GmbH in connection with the purchased services. If so,
- in the years 2015 to 2017
- in the year 2018?
Case 4: Electronic services
E-Brain GmbH, based in Cologne (Germany), offers a software that enables architects to design three-dimensional construction plans. The software can be downloaded for a one-time fee of EUR 2'000. The server is located in Cyprus. The annual upgrade (also via download) costs EUR 200.
The annual turnover of E-Brain GmbH is as follows:
- Buyer in Germany: EUR 250'000
- Buyer in Austria: EUR 80'000
- Buyers in Switzerland: EUR 120'000
If E-Brain GmbH becomes liable for VAT in Switzerland
- in 2017
- in 2018
The E-Brain GmbH does not provide any software, but scans plans sent to it by architects in Germany and sends them back to them by e-mail as electronic CAD files.
Does anything change in the VAT assessment in Switzerland?
Case 5: Treatment of collector's items under Art. 24a VAT Act
The Kunstgalerie Höhn GmbH in St. Moritz deals with paintings, which it partly purchases directly from artists, partly from private individuals or middlemen.
The following sales of paintings made in the 1st quarter of 2018 are to be assessed:
How are the individual deliveries of paintings taxed. Are there different possibilities, namely
- if settlement is made by the actual method
- for settlement according to the balance tax rate method?
Case 6: Digital currencies
The Digital Penny Foundation is based in Zug and aims to develop and distribute a digital currency called e-penny.
The annual income of the Foundation is made up as follows:
- CHF 10 million in donations (whereby the names are merely mentioned on the homepage)
- CHF 200,000 from conferences abroad at which the development of the digital currency and related technological knowledge is presented
- CHF 20 million from unrealised exchange rate gains (e-penny)
- CHF 500,000 from the mining of the e-penny
On the expenditure side, by far the largest item is the developer costs. These services are provided by a Berlin-based company held by the Foundation.
How is the VAT situation of the foundation to be assessed?