Tax issues and tax planning for permanent establishments

Case 1 "Representation of interests

Facts

According to the Articles of Association, the purpose of Association A, which has its registered office in Switzerland, is to represent the Swiss financial industry at the headquarters of the European Central Bank in Frankfurt am Main (D).

The secretariat is located at its headquarters in Zurich. This is also where the meetings of the Association's Executive Committee and its members take place, at which the basic pillars of the representation of interests are determined. The association has set up an office in Frankfurt a.M. to carry out the representation of interests. A lobbyist, with whom the association has entered into an employment relationship, also operates from this office.

Questions:

How is the office of Association A in Frankfurt a.M. to be qualified in Switzerland from a VAT perspective?

What are the consequences of value added tax?

Case 2 "VAT Grouping in Luxembourg

Facts

According to the ruling of the European Court of Justice in case C-274/15 of 4.5.2017, the formation of an "Independent Group of Persons (IGP)", which is a form of "cost sharing", is no longer permitted for groups in the financial industry. Therefore, the CFO asks you to analyse what the impact would be on the group in Luxembourg on 1.1.2019 after the abolition of the IGP benefits and in the event of a possible formation of a VAT group. The CFO would like to point out that Luxembourg intends to consistently implement the ruling of the European Court of Justice in case C-7/13 "Skandia America Corp. USA, Sverige branch".

Questions:

How are any service relationships between the individual companies to be taxed in principle on 1.1.2019 after the abolition of the "IGP"?

What would be the effects of setting up a VAT group in Luxembourg?

Case 3 "Establishment versus representation office

Facts

Zurich-based Helvetic Bank, which has so far only been active in Switzerland, intends to pursue its business activities abroad. The first step will be to open an office in Singapore to acquire new clients for Helvetic Bank. In an initial phase, however, the contracts with clients from the Asian region will be concluded exclusively with the head office in Switzerland.

Helvetic Bank sees more potential for the Arab market right from the start, so a branch office is being opened in Dubai.

All costs of the two foreign representations are paid or financed by headquarters on the basis of the actual costs incurred.

Question:

What VAT consequences do the two representations have for the headquarters in Switzerland?

Case 4 "Joint Venture

Facts

Löwen Bank, which is domiciled in Switzerland and operates internationally, is considering how to handle its administrative processes more efficiently. To this end, an internal working group is being set up with staff from Löwen Bank Switzerland and the subsidiary of Löwen Bank in Düsseldorf. The two companies want to achieve the following goal with this project:

Optimisation of payment transactions, possibly with the aim of realising a joint processing centre, which will operate as a separate service company for the two operative banking companies, possibly also for third parties.

The Swiss bank and the German subsidiary will each contribute EUR 1 million to the costs and declare their willingness to provide 500 man-days each for the project.

Questions:

What VAT consequences does this cooperation between the two banks have?

If the separate service company is established in Switzerland; what VAT consequences does this have for the new company and for the two banking companies in Switzerland and Germany?

Case 5 "Permanent establishments in Switzerland and Liechtenstein

Facts

An internationally active insurance group, the Insurance Group with headquarters in the UK also operates in Switzerland and Liechtenstein. In Liechtenstein, business is conducted through Insurance AG (IAG). The Group's service company, Insurance Service AG (ISAG), which is headquartered in the UK, has a branch office in both Switzerland and Liechtenstein. IAG (domiciled in Liechtenstein) also has a branch office in Switzerland. The main activity of the branch office is the representation of the Liechtenstein headquarters and other Insurance Group companies in Switzerland in the direct insurance sector.

Questions:

What are the consequences of this structure and how should the flow of services between the branches and the headquarters in the UK and Liechtenstein be handled?

Is there the possibility of group taxation in FL and/or Switzerland?

Which tax administration (FL or CH) is responsible for handling the application?