Facts
Association A. operates special needs schools in St. Gallen for children and young people with mental or physical disabilities. The association has concluded a framework agreement with a taxi company to be able to offer a school bus service to the students. The costs for this transport were reimbursed by the Swiss Federal Disability Insurance until the end of 2007 and thereafter by the Canton of St. Gallen. The Swiss Federal Tax Administration took the view that these transportation services were subject to value-added tax.
However, the Federal Supreme Court concluded that the reimbursement of transport costs by the Disability Insurance or the Canton should be qualified as subsidies and therefore remain exempt from value-added tax. This results from the constitutional right of students to free basic education under Art. 19 of the Federal Constitution. The transportation of students is part of this free service provided by the school authority and does not constitute an exchange of services within the meaning of value-added tax.
Considerations
The Federal Supreme Court states that the right to adequate and free basic education under Art. 19 of the Federal Constitution is a fundamental social right. This right is counterbalanced by the legal obligation of students to attend school. In addition to the main duty to provide instruction, the school authority also has the ancillary duty to organize the transport of students, if the school route is unreasonable.
According to the case law of the Federal…