Tax Controversy

Federal Supreme Court Decision: VAT for ground handling services

In its decision of 2 June 2021, the Federal Supreme Court dismissed an appeal by the Federal Tax Administration (FTA), which wanted to claim additional VAT of around 19 million Swiss Francs from the operator of the Zurich Airport. In the past, Zurich Airport had assumed that specific services such as the parking of aircraft, the use of applications and terminals, the use of the baggage sorting system and the supply of aircraft with energy and air conditioning were sovereign activities that were not subject to VAT. The Federal Supreme Court agreed with the lower court, considering that the fees for these services were not sovereign services and were therefore subject to VAT. However, it left open who was actually the recipient of the services and where the supplies were provided. If the recipients had been the ground handling services as claimed by the FTA, the supplies would have been provided domestically and subject to local VAT. If the recipients had been the airlines, as claimed by Zurich Airport, this would mean, particularly in the case of foreign airlines without a permanent establishment in Switzerland, that they would be outside the scope of VAT. In cases of domestic recipients, these supplies could potentially be classified as zero-rated, especially as they were intended for the immediate needs of the aircraft and their cargoes. Therefore, the matter was once again referred back to the FTA, which must now examine the contractual relationships among the various parties.

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