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VAT/Customs

Ralf Imstepf

Roger Rohner

Effects of current VAT leading decisions on practice

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Workshop on the occasion of the ISIS) seminar of 27 September 2018 entitled "Value Added Tax. Current. Compact. Interdisciplinary."

09/2018
The corresponding case solutions can be purchased for CHF
120.00
(introductory price)
be on sale in the shop
The case solutions and other documents can be obtained free of charge in the shop.

Case group 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 now demolishes the property after the purchase and creates 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 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 group 2 (Subsidies for outsourcing of a task by the community)

Situation 1

Canton X. is legally obliged to provide care for persons who require medical treatment or welfare measures due to drug abuse. Various possibilities have been discussed in the cantonal parliament, such as the provision of financial resources to a specialised institution. However, this solution was rejected. The canton then instructs a taxable person Y. to run a practice on the one hand and to employ a caregiver on the other. For this purpose, contracts are concluded on how the taxable person Y. is to implement the two projects. For both projects, the taxable person receives a fee from canton X. contributions.

Do the contributions constitute a subsidy?

Situation 2

A cantonal hospital Y. receives annual contributions from the canton X. towards the operating and investment costs. The canton concludes a performance contract with the cantonal hospital for inclusion in the list of hospitals. According to the contract, the hospital assumes the following obligations, among others:

  • All patients residing in the canton must be admitted and treated equally within the limits of capacity;
  • The hospital must ensure the provision of the entire spectrum of the service mandate, including notification in the absence of a guarantee;
  • The hospital provides the services required by law and defined in the hospital list;
  • The hospital must provide appropriate education, further education and training services;
  • The hospital must provide the canton with various data for checking the provision of services.

Do the contributions constitute a subsidy?

Situation 3

The forest district associations X. and Y. receive from the canton Z. contributions for the fulfilment of forest management by their foresters.

According to the agreements concluded between the associations and the canton, the associations must provide a forest ranger to carry out the tasks assigned to them. The agreements contain annexes with detailed lists of tasks (with guidelines on the number of hours to be spent on each task), modalities and deadlines by which foresters must submit an annual hourly report to the cantonal administration, and qualitative assessment criteria for the work of foresters.

The Forestry Act and the related ordinance stipulate that the tasks of management and supervision in the forestry sector are the responsibility of the canton. Even if the foresters are employed by an association, they remain under the authority of the cantonal forest inspector. This inspector checks whether the associations are fulfilling their obligations to the canton.

Do the contributions constitute a subsidy?

Situation 4

The purpose of Association X is to fight against sexually transmitted diseases. The Federal Office of Public Health, which is legally obliged to prevent sexually transmitted diseases, has concluded several contracts with the association, by which it has assigned various tasks in the field of prevention, such as the production of printed matter or the implementation of certain prevention programmes. In each case, a concrete catalogue of services that the association was required to provide was defined. In the contracts, the task of planning and realising brochures, for example, was described as follows:

  • Evaluate brochure requirements depending on the topic with different specialists and integrate them into the brochure production;
  • prepare annual planning of brochure production (decision in the steering group);
  • Management of the mandates for the production of the brochures;
  • Editorial tasks as required;
  • Search for additional financing options as required;
  • Prepare proposals for the marketing of the brochures;
  • Coordination of consultations - gathering feedback on the brochures - ensuring the flow of information on existing and planned brochures to the 'customers';
  • compile an inventory/file for brochure production and update it continuously
  • Coordination of the steering group and possible product-specific working groups (chairing and organising meetings, keeping minutes) for brochure production.

Milestones and interim targets were set for all contracts, with the BAG making the remuneration dependent on their achievement.

Case group 3 (sales agent term in the financial area)

Facts

An investment company domiciled in Switzerland introduces foreign cooperation partners to investors who invest in securities. The securities purchases are concluded directly between the foreign cooperation partners and the investors. The Investment Company plays a decisive role in negotiating the corresponding conditions and also claims a share of the purchase price as commission. The commissions amount to CHF 1 million per year.

The investment company wishes to register for VAT purposes. How do you rate the services provided by the Investment Company?

Variant 1

The cooperation partners of the Investment Company are domestic companies. Therefore, the Investment Company relies on the current, published administrative practice of the FTA and does not register for VAT.

variant 2

The cooperation partners of the Investment Company are domestic companies. Therefore, the Investment Company relies on the current, published administrative practice of the FTA, obtains a corresponding ruling, and does not register for VAT.

Case group 4 (coinsurance)

Facts

Together with another co-insurer who participates with the same quota, insurance X. offers insurance as follows (cf. BVGer v. 09.08.2016, A-6671/2015 and A-6674/2015, E. 3.3.3.)

In addition to the task of claims settlement, insurance X. has contractually stipulated management, processing and information obligations towards the co-insurer.
Is there a benefit relationship between insurance group X. and the co-insurers? Is this benefit relationship taxable - which amount is taxable?

Variant

The insurance company does not have these contractual obligations.

CHF
120.00

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