The result of a VAT inspection cannot be trusted

A foreign company registered as VAT payer and rented out works of art from the company’s art collection. During an inspection in 2004 by the Federal Tax Administration, the inspector found that the chosen structure was an appropriate solution. In 2014, the tax administration inspected the company again and considered the structure, which was still considered appropriate in 2004, to be tax avoidance.

The company appealed to the Federal Supreme Court and lost the case. The Federal Supreme Court justified its decision by stating that the mere fact that the tax authority does not object to an inspection without making specific statements or assurances to the taxpayer regarding the future tax treatment of the structure does not mean that it cannot also question the situation in the future. The tax authority should be free to reassess the situation at each further control. It is up to the taxpayers to inform themselves and to take the necessary measures to ensure correct taxation. For taxpaying companies, this means that they cannot rely on the result of an inspection and must contact the tax authorities in Bern with a specific request in in case they are unsure.

(Source: 2C_263/2020 of 10 December 2021)