Practical changes resulting from the partial revision of MWSTG 2018

Closely connected persons

Basics

• Article 3(h)(2) MWSTG
• Art. 24 para. 1+2 MWSTG
• Point 1.1.4, VAT information 07

Case study

As the name suggests, Kägi Treuhand GmbH provides accounting services, among other things. Managing partner Alfred Kägi is an enthusiastic sailor. As a member of the board and treasurer of the local yacht club, he is also responsible for the accounts. He has the trainee of Kägi Treuhand GmbH enter the bookings. The trainee of Kägi Treuhand GmbH also usually writes the necessary correspondence. A fee of CHF 5,000 is charged to the yacht club for this.

An external trustee has offered the same service to the yacht club for CHF 7'000. Is it sufficient for Kägi Treuhand GmbH to settle the CHF 5,000 with VAT, or must a correction of the tax base at Kägi Treuhand GmbH be expected?

Tax liability

Basics

• Art. 10ff. VAT ACT
• Art. 7ff. VAT
• VAT info 02
• Art. 19 para. 2 MWSTG
• Art. 32 VAT
• Point 4.2, VAT information 04

Case study: Place of supply of services, currently with combinations of services

The Hotel Hecht in Romanshorn offers an adventure weekend for two people at an all-inclusive price of CHF 1'925. The package includes

• Two overnight stays (incl. breakfast),
• A boat trip from Romanshorn to Friedrichshafen and back,
• In Friedrichshafen, admission to the Zeppelin Museum including guided tour and stand-up lunch in the museum's own restaurant, and
• A one-hour zeppelin flight over German territory.

According to Art. 5a MWSTV, transport services of persons with ships on Lake Constance are considered to be provided abroad.

Please determine the place of supply for this combination of services, taking into account Art. 19 (2) MWSTG in conjunction with Art. 32 MWSTV.

Case study: Start of tax liability

Waldner Balkon GmbH, based in Lörrach (D), specialises in the subsequent extension of existing buildings with additional balconies. Using its own patented solution, it succeeds in anchoring the balconies in the existing walls without additional supports. In 2018, sales can be presented as follows:

The activity in Germany is limited to advising domestic craftsmen. Assume that this is a service which is taxed at the place of the recipient. Please assess whether Waldner Balkon GmbH will be subject to mandatory VAT on the basis of the 2018 turnover?

Addition to case study: Start of tax liability

The first order for the installation of balconies in Switzerland will be carried out by Wald- ner Balkon GmbH in April 2019. From this time on, Waldner Balkon GmbH will also provide domestic deliveries in addition to its consulting services. The turnover for the years 2018 to 2020 can be depicted as follows:

When does Waldner Balkon GmbH become subject to mandatory VAT?

deduction of fictitious input tax

Basics

• Art. 28a VAT Act
• Art. 62 - 63 VAT
• Point 7.3, VAT information 09

Case study: Deposit control of fictitious input tax

In 2018, the non-taxable web designer Nicole Kälin buys a computer from a non-taxable private individual for CHF 2,000. As Mrs. Kälin achieves a turnover of more than CHF 100,000 for the first time in 2018, she will be entered in the register of VAT payers as of 1 January 2019.

Ms Kälin instructs you to prepare the quarterly VAT declarations. Does the aforementioned purchase from 2018 lead to a declaration in 2019? If so, which one?

Case study: subsequent deduction of fictitious input tax

In July 2016, Hitz Maler AG, which settles its accounts according to the effective method, purchased a used car from a private individual for CHF 18,000, which it has been using as a company car ever since. Until 31.12.2017 no deduction of fictitious input tax was allowed on this purchase (see Art. 28 para. 3 MWSTG [2017]).

Please assess whether the partial revision of the VAT Act as of 1.1.2018 might allow for a retroactive deduction of input tax and if so, how much would be involved.

Margin taxation

Basics

• Art. 24a VAT Act
• Art. 48a - 48d VAT
• Point 1.4, VAT information 07

Case study: loss offsetting

The taxable Brunner GmbH buys an antique vase from the non-taxable private person Albert Huber for CHF 17,000 and sells it to the private person Cornelia Zünd for CHF 15,000. Assume that in this case the margin taxation according to Art. 24a MWSTG is applied. Please calculate the margin.

Assuming Brunner GmbH reports other taxable sales of CHF 53,850 including 7.7% VAT. What is the taxable turnover to be declared, including 7.7% VAT?

Case study: Use as operating equipment

Martin Studer runs the restaurant Sonnenblick as a taxable sole proprietor. The restaurant buys a painting entitled "Goldenberg" from the non-taxable painter Erna Specht for CHF 5,000. The painting is hung in the restaurant's dining room.

Can a deduction of fictitious input tax be claimed or is margin taxation applicable?

5.6 Case study: Declaration

Half a year later, the picture "Goldenberg" catches the eye of the customer Anton Hegi. He offers Martin Studer CHF 7'000 for the painting and he sells it.

How is this sale to be declared? Please assume that the taxable person normally declares net sales.

The declaration after net sales is as follows:

Case study: Notification procedure

In March 2018, the taxable trustee Egon Zingg buys a motor vehicle born in 1946 from a private individual for CHF 30,000. The motor vehicle is a collector's item within the meaning of Art. 48a para. 3 let. c VAT Ordinance, which is subject to margin taxation. Egon Zingg is therefore not permitted to deduct fictitious input tax when purchasing. As of 1 July 2018, Egon Zingg will transfer his trust office to the trustee Bernhard Hecht, who is also subject to tax, by way of a reporting procedure. A price of CHF 40,000 is agreed between Egon Zingg and Bernhard Hecht for the motor vehicle, which is part of the transfer in the reporting procedure. In September 2018, Bernhard Hecht sells the motor vehicle to a private person for CHF 45,000.

Assume that margin taxation applies when Bernhard Hecht sells the motor vehicle. How is the margin calculated?