Tax Succession in the Transfer of a Partial Business Asset under the Merger Act

Facts

The case concerns the issue of value-added tax (VAT) succession in the transfer of a partial business asset within the meaning of the Federal Act on Merger, Demerger, Conversion and Transfer of Assets (Merger Act). The Federal Tax Administration (FTA) had determined VAT arrears for the years 2007-2012 against B. GmbH (the transferor). These arrears were later addressed to A. GmbH (the acquirer), as it had entered into the rights and obligations of the transferor as the tax successor.

In 2016, the transferor had transferred its taxi business to the acquirer, while it continued to operate a limousine service itself. The Federal Administrative Court had upheld the appeals of the acquirer, as it did not consider the prerequisites for tax succession to be fulfilled. The FTA then appealed to the Federal Supreme Court.

Considerations

The Federal Supreme Court states that under the VAT law of 1994 and 1999, tax succession required the previous business entity to cease to exist. This was not the case if only individual assets and liabilities were transferred.

Under the current law of 2009, Art. 16 para. 2 of the VAT Act refers to the Merger Act. Accordingly, a partial tax succession can also occur in…