Update on value added tax (2025)

Case group 1: Non-business cases

1. Facts: Foundation without benefits

The Zurich-based "Bureaucracy Stop" Foundation aims to reduce bureaucracy in Switzerland. It does this through advertisements in daily newspapers, operating a website, distributing flyers, and canvassing for popular initiatives that reflect the foundation's mission. One of its key political goals is to halve the budget of the Federal Tax Administration's VAT Department.

The foundation is financed partly by the endowment capital donated by the founder, Mr. Haran Tschan (resident in the canton of Zurich), and partly by donations from private individuals and companies subject to VAT controls.

The Foundation takes the view that, according to Article 18 paragraph 2 letters d and e of the VAT Act, no input tax deduction adjustment is provided for either for donations or for the dedication of the foundation's capital and that, therefore, it must be granted the full input tax deduction.

Question

• How do you assess this from a VAT perspective?

2. Facts: Foundation with symbolic performance-related remuneration

The "Bureaucracy Stop" foundation takes issue with the previous assessment. To establish a business activity that entitles to input tax deduction, it is selling 100 chocolate coins for 1 franc each in front of Zurich's main train station before Christmas.

Question

• How do you assess this from a VAT perspective?

3. Facts: Foundation with subordinate income from services

The Lucerne-based Foundation X is committed to funding projects for people with disabilities. It operates an online shop on its website, where T-shirts, mugs, and other merchandise can be purchased domestically.

At its headquarters in Lucerne, it also rents out parking spaces to third parties.

The financing of Foundation X is as follows (figures in CHF excl. VAT):

Question

• How do you assess the VAT situation of Foundation X? (Assumption: all expenses are fully subject to VAT, as far as possible, and the remaining expenses cannot be directly allocated to a specific area)?

4. Facts: Association with different purposes

According to its commercial register entry, the "Heavenly Music" association, based in Zurich, aims to support and promote church and charitable causes at home and abroad, thus pursuing a non-profit objective. A key element of the association's mission is the performance of Christian musicals in Switzerland. Seventy percent of these are financed through donations (from private individuals, churches or church-like organizations, and collections during the event). There is no admission charge for the musicals themselves. However, the association also receives fees from the sale of food at the musicals, as well as from the sale of books and T-shirts, from (opted) advertising services for companies, and from accommodation services. For this reason, the association has also registered as a VAT taxable entity. ⁰¹

Question

• How do you assess the association’s right to deduct input tax?

5. Facts: Association with announcement services

According to its commercial register entry and statutes, the Bernese Oberland Animal Welfare Association, based in Thun, pursues the purpose of operating rescue centers for surrendered pets and wild animals in need at various locations in the Bernese Oberland. The association is exempt from direct taxes according to Article 56(g) of the Federal Tax Act (DBG).

The association is financed exclusively through donations from third parties. You can choose whether you want to make a donation plus VAT, which will be posted on the association's website with a link to the donation, or you can make a donation without VAT, in which case the donor's name will be displayed on the outside of the animal shelter's large stables.

Question

• How do you assess the association’s right to deduct input tax?

6. Facts: Entrepreneurial activity as the main purpose

High Value GmbH, based in Geneva, operates in the field of taxable asset management and investment advice for highly wealthy individuals. It generates revenues in the high double-digit millions annually from this activity and is therefore registered as a VAT taxpayer. It only provides taxable services and is therefore generally entitled to full input tax deduction.

In the publicly accessible reception hall of its headquarters there is a collection of paintings worth CHF 5 million, which has been continually expanded and supplemented over time and is maintained by a curator on a contract basis.

Question

• How should the input tax deduction situation at High Value GmbH be assessed?

⁰¹ The case is based on the decision of the Federal Court of 05.10.2023, 9C_651/2022.

Case group 2: Crypto cases

1. Facts: Validation or verification services – allocation of services

Hephaistos AG has been registered with the Swiss Federal Tax Administration (SFTA) in April 2018. Its purpose is, among other things, the development of new technologies and applications, particularly in the areas of open and decentralized software architectures. It operates software and network nodes (notes), produces and validates blocks on blockchains, and validates transactions. Specifically, Hephaistos AG performs validation/verification activities as a "validator" in the Polkadot and Kusama blockchain networks. For its activities, Hephaistos AG collects block rewards (99.9%) and transaction fees (0.01%).

Question

• What are the VAT consequences of collecting block rewards and transaction fees?

2. Facts: Crypto tokens – acquisition tax

Kronos AG conducted an ICO (Initial Coin Offering) in 2018. In return for the funds raised (CHF 2 million excluding VAT), it offered investors tokens intended for use of all functions of the Kronos platform.

The platform brings together different categories of actors. The basic idea is that classical music stars can interact with their fans on the platform. The stars are rewarded with tokens for this; fans must purchase the token to interact, but can also be rewarded with tokens for their behavior on the platform (e.g., when they produce content). The platform is also particularly open to advertisers (e.g., music stores): In order to promote their products on the platform, they must purchase tokens. The platform operator, Kronos AG, which issues the tokens, can intervene on the platform to either retain or withdraw some of the tokens circulated, exchanged, or held by other users, or to allocate tokens to other platform users. In principle, however, the exchange of tokens is automated – based on smart contracts.

On May 3, 2018, Kronos AG signed a service agreement with its French sister company, Rhea SA. Rhea SA invoiced Kronos AG a total of CHF 1 million for its services in 2018.

As of January 1, 2019, Kronos AG will be registered with the Federal Tax Administration (SFTA) as a VAT payer. Subsequently, it will be audited by the FTA.

Question

• How do you assess this from a VAT perspective?

Follow-up question

• Same situation as in sections 2.3 and 2.4. Rhea SA invoiced the services it provided to Kronos AG in 2018 only on January 2, 2019. Does this change the VAT assessment?

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Case group 3: VAT Act partial revision

The following cases must be assessed based on the legal situation before and after 1 January 2025.

1. Facts: Platform taxation

On the online platform "Confucius Express," Chinese vendors sell goods worth up to CHF 50 in their own name and on their own account. The goods sold are then individually shipped by the Chinese vendors directly to domestic buyers by mail.

Question

• How should goods be recorded for Swiss VAT?

2. Issue: Net tax rates

Ms. Soldau is a sole proprietor in the hotel and catering industry in Switzerland and has been VAT-registered for five years. She generates annual revenue of CHF 1.8 million, split equally between accommodation services in the hotel, hospitality services in the restaurant, and consulting services for other catering businesses.

Ms. Soldau has previously accounted for VAT effectively, but has now decided to switch to accounting based on net tax rates.

Question

• What are the tax consequences?

3. Facts: Travel agency

Düsseldorf-based Reisegut AG sells hotel accommodations and coach tours in Switzerland to its customers in Germany under its own name. Worldwide, Reisegut AG generates annual sales of EUR 15 million.

Supplementary question

• Will anything also change for travel agencies based in Germany from 1 January 2025?