Update on value added tax (2023)

Case 1: Own shares

Basic facts - sale of treasury shares

The purpose of Lucky Shares AG, with its registered office in Zurich (VAT-registered, effective and invoicing according to agreed fees), is the acquisition, establishment and sale of companies as well as their financing.

Lucky Shares AG holds treasury shares which, on the one hand, were created directly from previous capital increases and, on the other hand, are based on a share buyback program. It now intends to sell all shares at fair value. In connection with this sale, pre-tax consulting and other administrative costs will be incurred.

Question

How should the sale of treasury shares be assessed for VAT purposes and what impact does it have on the input tax deduction of the related costs?

Factual variant 1 - Trading

Lucky Shares AG is listed on the stock exchange and, in addition to its investment activities, also trades in securities. In its Trading Department, own shares are also bought and sold on the stock exchange.

Question

How should the sale of treasury shares be assessed for VAT purposes and what impact does it have on the input tax deduction of the related costs?

Factual variant 2 - Sale of shares in the parent company

Lucky Shares AG does not sell its own shares, but those of its parent company, Mother Earth AG, based in Zurich.

Question

How should the sale of treasury shares be assessed for VAT purposes and what impact does it have on the input tax deduction of the related costs?

Factual variant 3 - Employee shareholdings

Lucky Shares AG transfers treasury shares to its employees within the framework of an employee participation program. If the employees' employment is terminated through no fault of their own, Lucky Shares AG has an obligation to redeem the shares at fair value.

Lucky Shares AG also transfers shares in its subsidiary Little Daughter AG, domiciled in Zug (alternatively in its sister company Big Sis AG, domiciled in Zug) to its employees free of charge.

Question

How should the sale of treasury shares be assessed for VAT purposes and what impact does it have on the input tax deduction of the related costs?

Case 2: Trusts

Issue 1 - Revocable Trusts

Plutos Privatbank AG (PPAG), based in Zurich, provides non-tax-exempt services to trusts. PPAG's client is also the Aiolos Trust. This was established in 2015 by Devon Miles, a British citizen residing in London. The trust deed states that Mr. Miles reserves the right of revocation. The beneficiaries of the Aiolos Trust are his son Bill Miles, who lives in the USA, and his sister Ruth Müller-Miles, who lives in Switzerland. Fides Trustees AG (FTAG), based in Bern, has been appointed as trustee (administrator).

Question

Are the services provided by PPAG subject to Swiss VAT?

Facts 2 - Irrevocable Trust

The same facts as in fact 1, but: The trust deed does not provide for a right of revocation. Both Bill and Ruth are entitled to USD 50,000 p.a. under the trust.

Question

Are the services provided by PPAG subject to Swiss VAT?

Issue 3 - Irrevocable Discretionary Trust

Same facts as in Issue 1, but the trust deed does not contain any right of revocation. Bill and Ruth are not designated as beneficiaries. Rather, it is up to the trustee to designate the beneficiaries. The Trustee has not yet done so.

Question

Are the services provided by PPAG subject to Swiss VAT?

Issue 4 - Irrevocable Discretionary Trust - catch-all clause

The same facts as in case 1, but there is no right of revocation in the trust deed. Devon Miles appointed his long-time attorney Michael Smith as protector of the trust when it was created. He is to ensure that the trustee uses the trust assets for their intended purpose. In addition, Devon has also prepared a Letter of Wishes in which he expresses his views on the future use of the trust assets. Bill and Ruth are not designated as beneficiaries in the Trust Deed. Rather, it is up to the trustee to designate the beneficiaries. The Trustee may, in his discretion, add any person or group of persons to the group of Beneficiaries at any time. The trustee may also exclude any beneficiary from the group of beneficiaries at any time.

The Trustee and the Protector subsequently agree in writing that they wish to exercise the discretion granted with regard to the group of beneficiaries in accordance with the information provided by Mr. Miles in the Letter of Wishes. The Letter of Wishes indicates that two natural persons (Bill and Ruth) and an NGO based in London are to be included in the circle of beneficiaries.

Question

Are the services provided by PPAG subject to Swiss VAT?

Facts 5 - Reference tax

Hoenir Private Bank Ltd. (HPB Ltd.), based in London, provides non-tax-exempt services to trusts. The client of HPB Ltd. is also the Aiolos Trust, for which HPB Ltd. provides services in the amount of CHF 15,000 p.a.. The trust was irrevocably established in 2015 by Devon Miles, a British citizen residing in London. The beneficiaries of the Aiolos Trust are his son Bill Miles, who lives in the USA, and his sister Ruth Müller-Miles, who lives in Switzerland, each of whom receives USD 50,000 p.a. as the sole trust beneficiary. Fides Trustees AG (FTAG), based in Bern, has been appointed as trustee.

Question

Are the services of HPB Ltd. subject to Swiss VAT?

If so, how are they taxable?

Case 3: Vouchers

Basic facts - sale of vouchers

Gastroevent GmbH, based in Lucerne (VAT-registered, effective and billing according to agreed fees), sells vouchers for a mystery dinner in 2022 at a price of CHF 400. The voucher includes a five-course dinner with a selection of wines, with an acting group involving the participants in a mystery.

The voucher can be redeemed on one of several dates visible on the webpage until the end of 2023.

The managing director of Gastroevent GmbH has read in VAT Industry Info No. 8, Hotel and Catering Industry, para. 8.2, that the sales of vouchers do not constitute services for consideration and are therefore not taxable.

At the time of redemption of the vouchers, Gastroevent GmbH will pay tax on the remuneration, charging CHF 300 at the standard rate and CHF 100 for the acting group's share at the reduced rate of 2.5 %.

Question

Is this procedure correct from a VAT perspective?

Factual variant 1 - Sale of vouchers without end

The vouchers for the mystery dinner do not have to be redeemed by the end of 2023, but are valid beyond 2023 as long as these mystery dinners are offered by Gastro-event GmbH.

Question

Does anything change in the VAT assessment?

Facts variant 2 - New Year's Eve magic

Gastroevent GmbH will be selling vouchers for the "Surprise New Year's Eve Magic 2023" from March 2023 for CHF 600. The promise is "a New Year's Eve you will never forget".

The planning is just beginning. The definitive program will be ready in October 2023. In addition to a six-course dinner with a selection of wines and champagne, a well-known comedian is planned to accompany the audience through the evening, a large fireworks display and a dance revue after midnight.

Question

Is this procedure correct from a VAT perspective?