Facts

X. Inc., a company headquartered in Florida (United States), operates various online dating websites. The majority of these websites allow their users to connect by country, language or areas of interest. Some websites aim to establish sexual relationships. The meetings take place virtually, with participants free to arrange a subsequent in-person meeting.

On January 29, 2010, the company submitted a questionnaire to the Federal Tax Administration to determine its liability to VAT, indicating that its activity had commenced on January 1, 2010 and that it expected a turnover of CHF 3,960,000 from services provided in Switzerland during the first twelve months. The Federal Tax Administration then subjected the company to VAT with effect from January 1, 2010.

As the company filed an objection, the Federal Tax Administration confirmed its decision. The Federal Administrative Court dismissed the company's appeal. The company then filed a public law appeal to the Federal Supreme Court.

Considerations

The Federal Supreme Court begins by examining whether the services offered by the company on its online dating websites fall under the exception provided for in Article 8, paragraph 2, letter a of the Value Added Tax Act (VATA), which covers "services that are usually provided directly to natural persons present", or if they are subject to the general rule of Article 8, paragraph 1 VATA, which provides that the place of supply of services is the place where the recipient has its registered office or domicile.

The Federal Supreme Court considers that the services offered by the company on its online dating websites do not fall under the exception of Article 8, paragraph 2, letter a VATA, as they are exclusively provided remotely, via the internet, without any physical meeting between the service provider and the recipient being necessary or even envisaged. Therefore, these services are subject to the general rule of Article 8, paragraph 1 VATA and are deemed to be provided at the place of the recipient, i.e. in Switzerland.

The Federal Supreme Court then…