THE SWISS VAT TERRITORIALITY IN TRANSACTIONS WITH OFFSHORE COMPANIES

The Federal Supreme Court (FSC), with sentence no. 2C_402/2021 dated 10 November 2021 on value added tax (VAT), clarified the tax treatment of the provision of services provided to an offshore company. The FSC clarifies in particular that (consid. 5.1 and following):

1. In general, the place of the provision of services corresponds to the place of the recipient of the service

2. For VAT purposes, an "offshore" company is a passive foreign investment company, with no economic substance (it does not have any own infrastructure or staff and does not carry out any operational activity), which is simply the holder of a current account or securities deposit and which receives services that generally consist in the mere management of the goods owned by the offshore company itself.

3. The Swiss FTA notes that the tax treatment of services provided by taxpayers to offshore companies depends on the place of residence of the beneficial owners (those who hold the majority stake, i.e. more than 50%). If all beneficial owners are resident abroad, the services rendered pursuant to art. 8 co. 1 VAT to this offshore company are considered as supplied overseas and are therefore not subject to the tax.