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Updated: Feb 11, 2022


NEWSLETTER 2021 - 03



In VAT audits, surprisingly, the question of the taxable person or the entity of the company comes up again and again. Recently, the Swiss Federal Administrative Court (SFAC) has again ruled on this issue (cf. A-5196/2020). Careless "assumptions" or "presumptions" that one "won't be liable to VAT anyway" can be costly and nerve-racking. In principle, it is not too difficult to make a correct decision on this; the law is clearly formulated; decisions of the SFAC and the Swiss Federal Supreme Court (SFSC) on this subject already exist in large numbers. In the section below, we would like to explain what is actually important in order to be assessed as an independent VAT subject.

Definition of the VAT liability according to Art. 10 VAT Law

Anyone who operates a business irrespective of its legal form, purpose and profit motive and who is not exempt from VAT liability is liable for VAT. A business is operated by anyone who independently carries out a professional or commercial activity aimed at the sustained generation of income from supplies and who presents himself to the market under his own name. A company is exempt from VAT liability if, among other things, it generates less than CHF 100,000 in turnover from taxable supplies in Switzerland within one year, unless it waives its exemption from VAT liability.

Self-employment or dependent employment?

Whether an activity is to be qualified as self-employed or dependent employment for VAT purposes is determined on the basis of a comprehensive assessment of all relevant factors. In doing so, the assessment of the activity must primarily be made according to economic, actual criteria (so-called "economic approach"). The civil or contractual law perspective is not decisive, but at least has an indicative effect.

Other important indications for the self-employment of an activity are in particular:

  • acting and appearing in one's own name towards third parties

  • bearing the entrepreneurial risk (profit and loss)

  • the choice of accepting or not accepting a task

  • the right to organize the fulfillment of tasks independently.

It can also be important whether a company employs staff, has its own premises, has various, changing clients and is independent in terms of business management and work organization.

Appearance in own name

As a matter of principle, the activity is attributed for VAT purposes to the person who appears externally, i.e. towards third parties, in his own name. For an independent external appearance, it is particularly important that the businesses can be distinguished by their own company signs and telephone connections. In the case of a common entrance, the business premises must be clearly separated from one another and labeled so that persons entering can recognize the independence of the businesses.

Unit of the company

The VAT liability relates to all transactions and branches of the business, irrespective of whether the businesses have their own company names, keep their own accounts, invoice each other, etc. The taxable amount is calculated on the basis of the taxable amount of the business. According to the principle of the unity of the company, the turnover of the entire company must be added together, with the exception of those activities that belong to the private sphere of the entrepreneur.

Decision of the Swiss Federal Administrative Court (SFAC) A-5196/2020 of August 6, 2021

The complainant operates a pharmacy. In the same building as the pharmacy, there are several therapy rooms in which medical and other treatments are offered and provided. The complainant has concluded rental agreements with various therapists. The therapists were authorized to provide their treatments on the complainant's premises.

The SFTA added the revenues generated by the leased therapists to the pharmacy, since in particular the requirements for an independent market presence were not fulfilled for the therapists.

The complainant, on the other hand, argued, among other things, that it rents individual rooms to self-employed therapists who pay a monthly (turnover) rent in line with the market for the use of the therapy rooms. The rent is due even if there are no clients, which is why the risk of default lies with the therapists. The same applies to the collection or del credere risk, since the clients pay the therapists directly. The therapists alone would decide on the therapy measures and would not be accountable to the complainant. Moreover, the complainant would not bear any responsibility for the therapies carried out. Furthermore, the therapists were completely free to determine their own working hours and the scope of their work; the complainant had no right to issue instructions in this regard. Although some of the therapy sessions were booked by the pharmacy staff, the final decision on the provision of the service lay with the respective therapist. All therapists are registered as self-employed for social security purposes and pay their own taxes on the services they provide. In addition, they have their own homepage; advertising activities "within the framework of the therapy center" are carried out exclusively with the consent of all therapists and are charged to them on a proportional basis.

The SFTA replied that, from the point of view of VAT, the complainant's actions and arrangements with regard to the therapy center went far beyond those of a mere rental of business premises. The complainant advertised the services provided in the therapy center in its own name and operated a website created specifically for this purpose, including the logo of the therapy center. Moreover, the only telephone number listed under contacts belonged to the complainant, and the therapies could be arranged directly with employees of the pharmacy business. In addition, there was a joint entry in the telephone directory for the pharmacy and the therapy center in the name of the operator of the pharmacy. Finally, the SFTA states that the complainant has a business model with the aim of providing a comprehensive range of health services. Customers of the therapy center are also potential customers of the pharmacy and vice versa. The complainant also determines the general conditions of the business and work organization, which is why the therapists cannot act completely independently.

The SFAC recognized that in this case, certain aspects speak for an independent appearance of the therapists, while others indicate a uniform appearance. The SFAC ruled that, within the framework of an overall consideration, the indications which speak against the qualification of the therapists as independent VAT subjects predominate. The appeal was therefore dismissed. The decision has already been appealed to the Swiss Federal Supreme Court.

What does a taxable person have to consider?

The Swiss VAT Law clearly defines in Art. 10 what is meant by "enterprise". Of course, words are relative and can be interpreted in one direction or the other. It is also understandable that there are certain uncertainties. Therefore, it is all the more important to actively and transparently discuss and debate these uncertainties with the SFTA in advance. A so-called ruling or legally binding information on the VAT consequences of a concretely described factual situation creates legal certainty. In this way, subsequent negative surprises can be avoided, especially in the case of VAT audits.


Of course, we will be happy to assist you in assessing the subjective VAT liability and the VAT attribution of services rendered or take over the discussions with the SFTA for you.

Have a merry Christmas and a happy new (VAT) year 2022!

With best regards from your VAT/Customs team

Mónika Molnár Florian Hanslik Anita Machin Jane Jachnow

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