- The Federal Court in Switzerland has made two recent decisions that clarify the concept of subsidies and public law contributions.
- The court ruled that the flow of funds within the same public administration does not qualify as a subsidy.
- This overturns previous administrative practice and opens up new opportunities for input VAT deductions in public administrations.
- The Swiss Federal Tax Administration (SFTA) has proposed to adapt its guidelines to align with the court’s decisions.
- The court based its definition of a subsidy on federal law, stating that it requires funds to leave the municipality and be allocated to a beneficiary outside of the public body.
- As a result, public administrations can now consider VAT paid on investments as recoverable rather than a final cost.
- Stakeholders in communes and cantons should examine whether they are impacted by these developments and take advantage of potential VAT deductions.
- Public bodies should ensure proper VAT recovery on investments to avoid unnecessary tax loss.
Source: blogs.deloitte.ch
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
