Once again the FTA has had to accept defeat before the Federal Court (2C_334/2014 of 9 July 2015). Under discussion were the VAT consequences of the sale of pig farms. The procedure originally chosen was anything but optimal and with a great deal of luck and the support of the Federal Court the mistake even had a happy ending.
A partnership not subject to VAT granted a lease to a closely related company, which in 1999/2000 constructed two pig farms on the leased land. As it rented out the pigsties to the partnership with open disclosure of the VAT, it claimed the input tax deduction of just over CHF 200,000. In 2006 it probably recognised that this arrangement was not optimal and sold the sties to the partnership without VAT.
During the audit of the company in 2011 the FTA discovered that the sale had been executed without VAT and reclaimed the input taxes claimed in 1999/2000 as own use tax because of the change in use. However, the Federal Court rightly held that under the old VAT Law the option for taxation of the rental income was not even valid. Under Art. 26 Old VAT Law the option was possible, only if the tenant was liable for the tax and the option was approved by the FTA. In the specific case neither condition was fulfilled. Invoicing the rent with VAT does not change this.
Therefore there was no change of use and the FTA’s argument that a quasi-option existed, was rightly rejected by the Federal Court. This is justified the more so, because in the reverse case (see an earlier blog) the FTA also does not accept the option without open disclosure of the tax.
Therefore the only possibility remaining would be the correction of the input tax deduction incorrectly claimed in 2000. But in 2011 this was no longer possible for the FTA, because it was already time barred.