International Tax Review is part of the Delinian Group, Delinian Limited, 8 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2023

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Swiss Court upholds CHF 100 million import VAT adjustment

intl-updates-small.jpg

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.

suter.jpg
demir.jpg

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

more across site & bottom lb ros

More from across our site

Premier League football clubs are accused of avoiding paying up to £470 million in UK tax, while Malta is poised to overhaul its unique corporate tax system.
Bartosz Doroszuk of MDDP offers insights on Poland’s new tax legislation on shifted profits, as the implementation deadline looms nearer.
Four tax specialists preview the UK’s transfer pricing requirements, which come into effect on April 1.
The rise of the QDMTT will likely change how countries compete on tax and transfer pricing policy, but it may not reverse decades of falling corporate tax rates.
ITR’s latest quarterly PDF is going live today, leading on the EU’s BEFIT initiative and wider tax reforms in the bloc.
COVID-19 and an overworked HMRC may have created the ‘perfect storm’ for reduced prosecutions, according to tax professionals.
Participants in the consultation on the UN secretary-general’s report into international tax cooperation are divided – some believe UN-led structures are the way forward, while others want to improve existing ones. Ralph Cunningham reports.
The German government unveils plans to implement pillar two, while EY is reportedly still divided over ‘Project Everest’.
With the M&A market booming, ITR has partnered with correspondents from firms around the globe to provide a guide to the deal structures being employed and tax authorities' responses.
Xing Hu, partner at Hui Ye Law Firm in Shanghai, looks at the implications of the US Uyghur Forced Labor Protection Act for TP comparability analysis of China.