Facts
A. Limited is a company established in 1999 and domiciled in the British Channel Islands. Its business activities consist of holding, trading, renting, and lending artworks. The company does not have a business office or permanent establishment in Switzerland. The beneficial owner of the company was resident in Switzerland during the relevant period.
In 2002, the company filed an "Understatement Declaration Abroad" with the Federal Tax Administration (FTA) and was subsequently registered in the value-added tax register. Between 2009 and 2015, the company imported several artworks into Switzerland, which it made available to its beneficial owner for the furnishing of his properties in exchange for a rental fee of 5% of the value.
The FTA concluded that the company's subjective tax liability due to tax avoidance was not given during the controlled period and the subsequent tax periods until March 31, 2015. It therefore demanded taxes in the millions.
Considerations
The Federal Supreme Court examined whether the rental of the artworks by the company to its beneficial owner constituted a commercial, professional, or industrial activity and established the company's tax liability in Switzerland.
The Federal Supreme Court concluded that the structure chosen by the company exhibited all the characteristics of tax avoidance. While there may be legitimate reasons for holding art collections through corporations, the company primarily served its beneficial owner by allowing him to use artworks from his collection and thus satisfy his private living needs.
Although the provision of services was in itself…