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Mark Cagienard

Urs Denzler

Remuneration/cost reimbursement vs. items in transit


Workshop on the occasion of the ISIS) seminar on 26 September 2019 entitled "Value Added Tax. Current. Compact. Interdisciplinary.".

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The case solutions and other documents can be obtained free of charge in the shop.

1. treatment as a total or ancillary service


Flug AG, based in Oerlikon, specializes in the management of business jets. In order to fulfil the contract with the owner of the business jet, Flug AG procures services from third parties for the operation of the business jets. These services include, for example, the purchase of fuel. The company's own personnel are responsible for flight planning, including the processing of weather information, and the coordination of all services. Flug AG charges the owner of the business jet (although it is not an international air carrier within the meaning of Art. 23 para. 2 item 8 VAT Act) for the services it provides itself as a fixed monthly management fee. The services purchased from third parties are charged with a handling surcharge of 10%.

The previous accountant qualified these services as follows:

Supply of fuel: taxable at the place of refuelling

Monthly management fee: taxable at the recipient's location

Her colleague Franziska was now able to take over the bookkeeping and wonders whether this qualification is correct. Please help Franziska: Under which circumstances would this qualification be correct? What would be alternative assessments?


In the case of a Gulfstream G550, the owner of the aircraft is a limited company domiciled in the British Virgin Islands. Assume that the tax administration qualifies this limited company as a passive investment company and therefore makes a claim on the beneficial owners behind this company. This is a Swiss citizen resident in Geneva.

2. treatment as transitory items

Architektur AG, based in Munich (DE), is known for the conversion and extension of old farmhouses and country houses in Germany. The Architektur AG does a favour for a golf colleague of the company owner and exceptionally takes on an assignment abroad. The golf colleague Mr. Schmidt, who lives in Grünwald (suburb of Munich, DE), commissions Architektur AG to plan the conversion of an existing rustico for holiday purposes in Ticino. After the project has started, Mr. Schmidt draws the attention of Architektur AG to a possible VAT obligation in Switzerland during an interim meeting.


Architektur AG will contact you and ask you to assess whether registration in the Swiss VAT register is necessary. The following values are known:

  • Worldwide turnover converted into CHF 900,000
  • Of which fixed fee for project in Ticino CHF 80,000

Does Architektur AG have to be registered in the Swiss VAT register?

The conversion does not run smoothly and it is necessary that the architect in charge supports the site manager on site, who is commissioned by Mr. Schmidt. In this context, the architect receives the following services in Ticino:


  • Four nights incl. breakfast in a hotel: CHF 600 (net) / CHF 22.20 (VAT)
  • Food and drink: CHF 300 (net) / CHF 23.10 (VAT)
  • Plan copies for craftsmen by Copycenter: CHF 100 (net) / CHF 7.70 (VAT)

While the hotel bill is made out to Architektur AG in Munich, the receipts for other expenses are sales slips. All expenses are entered in the accounts under the expenses of Architektur AG, which is now entered in the VAT register. Architektur AG passes on these expenses to the client Schmidt. The corresponding fee invoice to Mr. Schmidt shows the following details, among others:

Mark Cagienard Urs Denzler VAT Value added tax Remuneration Reimbursement of costs transitory items zsisTax law Tax

As regards VAT, Architektur AG takes the view that the local expenses were pre-financed by it, are now invoiced to Mr Schmidt and therefore do not form part of the taxable supply. The 10% handling surcharge corresponds approximately to the administrative expenses actually incurred. Do you agree with the argumentation of Architektur AG? If not, what, in your view, speaks against this qualification?


Variant on B.: For cost reasons, the architect spends the night in Italy, close to the border, where she can also have meals. How do you assess the further charging of these expenses?

3. treatment as the main service (duplication)

Case study A

Tunnel AG, based in Winterthur, builds motorway and railway tunnels throughout Switzerland. It has been commissioned with the construction of a railway tunnel. The client requires that the employees deployed on the construction site undergo an annual medical check-up. Among other things, Tunnel AG sends civil engineering worker Müller to the doctor, who carries out the job-specific check-up. Since Mr. Müller will be travelling to Madagascar in the near future, he will have the appropriate vaccinations administered on this occasion. The doctor issues the invoice for the check-up and the vaccinations to Tunnel AG, which also pays the amount.

Since the vaccinations have nothing to do with the employment relationship, Tunnel AG is ordering Mr Müller to pay the costs. This was done in 2018 and in the meantime a VAT auditor has announced his arrival. When he sees Tunnel AG's invoice to Mr Müller for the vaccinations, he takes the view that 7.7% VAT is due on it. Tunnel AG does not have the necessary authorisation to carry out medical treatment, which is why it cannot be a tax-exempt service. Nor is there any sale of medicines, which is why the reduced rate under Art. 25 para. 2 lit. a no. 8 VAT Act does not apply.

Although the auditor's explanations sound quite convincing, the head of finance calls you and asks you for your opinion on the matter. Do you share the opinion of the tax auditor?

Case study B

Property AG is a real estate company based in Winterthur. In connection with the review of the acquisition of a large Swiss real estate portfolio, it has purchased services from various third parties and then partially invoiced them to two foreign co-investors. There is an agreement whereby each of the three parties must pay one third of the audit costs. These are the costs of a so-called "due diligence" audit, i.e. a comprehensive survey, valuation and analysis of the acquisition objects. In detail, the following services were sometimes charged on:

  • Inventories relating to the property portfolio;
  • Services for the valuation of real estate;
  • environmental analyses (environmental impact assessment);
  • Legal advice (construction law, tax law, real estate law);
  • translations;
  • Project management and coordination services;
  • Market research;
  • On-site inspections;
  • Clarification of the tenancies.

The services were purchased independently from each other by specialised companies (real estate valuers, law firms, environmental auditors, financial specialists, architects, etc.) and charged to the two co-investors.

Within the framework of an audit at Property AG, the FTA takes the position that the oncharging of property is subject to value added tax in Switzerland. The focus is on the valuation of the real estate with a view to acquisition, which is why there is a close connection with the location of the property within the meaning of Art. 8 (2) f VAT Act. Property AG, on the other hand, takes the view that this is a matter of charging on individual main services, each of which must be qualified for VAT purposes and linked separately.

Assess the facts of the case.

Case study C

The Analogue Group is active in the international distribution of advertising materials. The parent company of the group, Analogue (company "A", located in state A) purchases IT services from the IT company DataPro (company "D", also located in state A) for itself and for its subsidiaries Business (company "B", located in state B) and Consumer (company "C", located in state C).

Variant A:

IT services for companies B and C are provided by subsidiaries E and F of D, which are locally based in the respective countries B and C. What is the situation from the point of view of Swiss value added tax if:

  • Country A is Switzerland?
  • Country C is Switzerland?

Variant B:

Same as option A, but parent company A and IT company D only conclude a framework agreement. The framework agreement regulates certain common conditions of the contractual relationship in case Parent Company A or one of its subsidiaries B and C order IT services from D Group.

Variant C:

Same as variant A, but the local customers B and C are not subsidiaries but permanent establishments of A. Company A buys IT services from IT company D, which it needs for itself and for its permanent establishments in countries B and C.


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