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NEWSLETTER 2022 - 04



On December 10, 2021, the Federal Supreme Court (FSC) defined the existence of tax avoidance in its ruling (2C 263/2020). There is a lot of case law on tax avoidance, especially in the use of aircraft. The conditions established by the FSC for the existence of tax avoidance are the following:

  • The legal arrangement chosen by the parties involved appears to be unusual, unprofessional or outlandish, and in any case completely inappropriate to the economic circumstances.

  • It can be assumed that the chosen legal arrangement was made abusively merely in order to save taxes that would be owed if the circumstances were properly ordered.

  • The chosen procedure would actually lead to a considerable tax saving, provided that it would be accepted by the tax authority (so-called effective element).

However, according to the FSC, it must be examined in each individual case whether these conditions are actually met. If the conditions for tax avoidance are met, the taxation is to be based on the legal arrangement that would have been appropriate to achieve the intended economic purpose. Tax avoidance is only possible in very exceptional situations, namely if the chosen legal arrangement is beyond what is economically reasonable. The subjective element proves to be decisive insofar as the assumption of tax avoidance remains excluded if other reasons than mere tax savings play a relevant role in the legal arrangement.

Judgment of the Federal Supreme Court: 2C 263/2020

The beneficial owner of A. Ltd., which has its registered office in the British Channel Islands, is B., who was domiciled in Switzerland during the relevant period. In 2002, A. Ltd. applied to the FTA for a declaration of subordination abroad and registered with the VAT authorities as of October 1, 2002.

A. Ltd. imported various works of art into Switzerland, which it made available to B. in return for a rental fee. In November 2014, the Swiss Federal Tax Administration (SFTA) conducted an inspection at the company's tax representative regarding the tax years 2009 to 2013. The SFTA came to the conclusion that the subjective tax liability of the company had not existed due to tax avoidance in the controlled period and in the (non-controlled) tax periods until March 31, 2015.

In its ruling, the FSC states that the arrangement chosen by the company bears all the characteristics of tax avoidance. Even if there may be legitimate reasons for this, in the opinion of the FSC, the company serves its beneficial owner mainly to provide him with works of art from his collection for use and thus to satisfy his private living needs. This did not call into question either the service or service exchange character of the paid rental of works of art or the entrepreneurial activity of the company. However, under normal circumstances, services of this kind would have had their place abroad and, accordingly, would not have given rise to a tax liability of the company in Switzerland. The company's tax liability in Switzerland therefore only arose because it submitted an import license and at the same time applied for entry in the register of persons subject to value added tax. However, there were no apparent economic reasons for the company to submit this declaration. Rather, it obviously served the sole purpose of being able to claim the input tax deduction and thus to be able to offset the import VAT owed on the importation of the works of art, which would otherwise have been the final burden on the beneficial owner. If the SFTA were to accept the company's arrangement, this would result in a considerable tax saving for the company and its beneficial owner. According to the FSC, the appeal proved to be unfounded and was dismissed.


If you have any questions on the above-mentioned topic or need assistance in evaluating your structure, we will be happy to assist you.

With best regard from your VAT/Customs team

Mónika Molnár Florian Hanslik Anita Machin

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