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Swiss Court upholds CHF 100 million import VAT adjustment

25 January 2017

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Swiss companies with cross-border supply chains need to check they fully comply with Swiss laws on VAT and importation after a recent case that went in favour of the tax authorities.

Benno Suter Hevin Demir

In the court decision A-2675/2016, dated October 25 2016, the Swiss Federal Administrative Court decided in favour of the Swiss Federal Customs Administration (SFCA) concerning an import VAT adjustment of more than CHF 100 million ($99.2 million) and late payment interest of CHF 924,854 for imports that occurred between 2009 and 2014. The court backed the application of the deductive method but did not address whether the SFCA had created a legally non-existent distinction between a domestic and non-domestic importer.

Company A is the non-Swiss established purchasing company of the international C group. Company A is Swiss VAT registered. Company C is the local Swiss sales company of the C group.

The criminal investigation team of the SFCA discovered that the VAT value for imports that took place between 2009 and 2014 was based on the invoice from the foreign supplier to Company A rather than the actual market value.

Usually, where the goods are imported in fulfilment of a sales or commission transaction, the import VAT value in Switzerland is calculated on the remuneration (Swiss VAT Law, Article 54, paragraph 1(b)).

In this case, however, Company A failed to prove a direct supply from its foreign vendor and thus performed the import in its own name and not part of a sales or commission transaction.

In the court decision, the organising of the transport to Switzerland and the transition of economic disposal, provided the predominant arguments to the Federal Administrative Court. The decision also included parts of the criminal investigation team's report containing several interviews with those responsible for logistics and tax at Company A and Company C.

The SFCA decided that the correct market price is the sales price from A to C minus 10%. This deductive method is also mentioned in the guidelines, VAT information 06, of the Swiss Federal Tax Authorities. This interpretation has now been affirmed by the Federal Administrative Court.

The Federal Administrative Court deliberately left open the question as to whether the practice of the SFCA creates a legally non-existing distinction between established and non-established importers in Switzerland. With regard to the late payment interest, the court argued that the exemption according to Article 87, paragraph 2 of the Swiss VAT law did not apply because the Administrative Court concluded that there was no proof of an error on the authorities' side. The Administrative Court disagreed with the argument that the import customs office failed to challenge the declared import VAT value while challenging other aspects such as the HS Tariff number and preferential proof of origin in previous imports.

The company has appealed against the decision to the Swiss Federal Court. In the meantime, companies with similar supply chains should assess the potential impacts of the decision.

Benno Suter (bsuter@deloitte.ch) and Hevin Demir (hedemir@deloitte.ch)
Deloitte
Tel: +41 58 279 6366 and +41 58 279 6902
Website: www.deloitte.ch






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