Holding companies in Switzerland are generally not subject to Value Added Taxes (VAT), because they generate revenues from subsidiaries which do not qualify as a “payment” under VAT. However, according to the Federal Tax Administration (FTA), holdings with substantial assets might generate revenues with VAT without being aware of it.
Holding companies usually provide services for the strategic management of the group. Subsidiaries from these holding companies benefit from these services (“shareholder costs”) and that is why they represent revenue which are subject to VAT.
If a holding company does not record this revenue accordingly and therefore does not report the VAT to the Federal Tax Administration (FTA), FTA applies a flat rate to evaluate the taxable revenues. This means that VAT is calculated on the basis of the assets (between 2 and 3 per mill of the assets). For example, with assets of CHF 10 Mio. the respective revenue add up between CHF 20’000 and CHF 30’000. VAT on these revenues would be between CHF 1’600 and CHF 2’400 per year.
If no such services are charged to the subsidiaries, burden of proof lies with the holding company and not with the FTA.
The Federal Administrative Court confirmed the approach of the FTA in two court rulings (A-1668/2015 und A-1679/2015). In one of these cases, the VAT liability amounted to CHF 4 Mio. Both rulings were appealed against, but the Federal Court confirmed the view of Federal Administrative Court.