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Updated: Feb 11, 2022


NEWSLETTER 2021 - 02



When supplies are recharged within group companies, the question arises again and again as to how these are to be qualified for VAT purposes and how the invoicing is to be done. However, many people forget the essential question of the value at which these supplies should actually be taxed.

Taxable performance relation and remuneration

Services rendered in Switzerland by taxable persons against payment are subject to VAT unless the law provides for an exception (Art. 18 para. 1 VAT Law). The VAT obligation focuses on the exchange of supplies. There must be an internal economic context or a sufficient connection between the supply (delivery or service) and the consideration (payment). As a rule, the consideration is also the basis for calculating VAT: VAT is generally calculated on the consideration actually received. The remuneration also includes the reimbursement of all costs, even if these are invoiced separately (Art. 24 para. 1 VAT Law).

Art. 24 para. 2 VAT Law provides for an exception from this principle that the remuneration actually received is used as the basis for calculating the VAT. The exception relates to supplies provided to closely related parties.

VAT assessment for supplies provided to closely related parties

Closely related parties are, according to Art. 3 let. h VAT law:

  • the owners of at least 20 per cent of the nominal or basic capital of a business or of an equivalent participation in a partnership, or persons associated with them; the latter are persons who have a special personal (e.g. family) or economic relationship with the holder of the participation, e.g. family members or sister companies;

  • foundations and associations with which there is a particularly close economic, contractual or personal relationship; pension schemes are not regarded as closely related persons.

If supplies are made to closely related parties, the VAT assessment is based, as already mentioned, on Art. 24 para. 2 VAT Law, according to which the consideration is deemed to be the value that would be agreed between independent third parties.

Decision of the Swiss Federal Supreme Court

In the Swiss Federal Supreme Court decision 2C_443/2020 of October 8, 2020, the Swiss Federal Supreme Court ruled on the assessment and VAT calculation of benefits to closely related parties. In this case, the SFTA did not have any documents, such as invoices or contracts, which could prove the existence of a supply. They assessed a VAT claim within the scope of a VAT account with A GmbH (architecture firm). The architecture firm trades through its two partners B and C, who are at the same time the sole managing directors of D GmbH and E GmbH, respectively. The SFTA based their VAT claim on unrecorded and untaxed supplies of services by A GmbH to the two closely related companies D GmbH and E GmbH. It calculated the additional claim based on the sales reported by the companies less a profit margin of 10%. Thus, the SFTA used the resale price method to measure the third party price.

According to the Swiss Federal Supreme Court, in the absence of detailed documentation, the resale price method is often the only practicable method for determining the value of supplies between closely related parties. The SFTA had rightfully deducted a profit margin of 10% from the sales of the two companies D GmbH and E GmbH and calculated the VAT on the difference.

What do I have to consider as an entrepreneur?

The following should be considered when recharging for supplies:

  • First of all, it must be clarified whether the invoicing is made to a closely related party.

  • If this is the case, the invoiced remuneration should be compared with the third-party price of the services rendered (market value).

  • If the third-party price is higher, this should be used as the assessment basis for the VAT calculation and declaration.


We will be happy to assist you with VAT or customs questions and are always at your disposal.

Best regards from your VATastic team

Mónika Molnár Anita Machin Florian Hanslik

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