Constitutionality of Group Taxation under Art. 17 para. 3 VATD

Facts

X AG and several banks (A., B., C., D.) applied to be treated as a single taxable person for value-added tax purposes (group taxation). The Federal Tax Administration rejected this, as the required close connection and unified management of the companies was lacking. The Federal Tax Appeal Commission concluded that Art. 17 para. 3 VATD, which regulates group taxation, is unconstitutional.

Both X AG and the banks, as well as the Federal Tax Administration, filed administrative court appeals against the decision of the Tax Appeal Commission. The Federal Supreme Court dismissed the appeal of X AG and the banks and upheld that of the tax administration.

Considerations

The Federal Supreme Court first examined whether the Federal Council had exceeded its powers in enacting Art. 17 para. 3 VATD and violated the principles enshrined in Art. 8 para. 2 Trans. Prov. FC.

It concluded that group taxation is compatible with Art. 8 Trans. Prov. FC, insofar as it takes into account the economic characteristics and the actual integration of the companies. The requirement of unified management, which presupposes a hierarchical structure of superiority and subordination, is…