Input Tax Deduction for the Acquisition of Works of Art

Facts

X. AG is a mixed holding company that, in addition to its investments and central purchasing, also holds a larger inventory of works of art. The Federal Tax Administration (FTA) refused the company the input tax deduction and the tax-free withdrawal for the acquisition of seven works of art in the years 2007 to 2009, as it did not classify these activities as business-related.

X. AG filed a complaint against this decision up to the Federal Supreme Court. The Federal Supreme Court upheld the complaint and referred the matter back to the FTA for reassessment.

Considerations

The Federal Supreme Court stated that the input tax deduction depends, in addition to the formal requirements, on the fact that the taxable person is economically burdened with input taxes and that these arise "within the framework of the business activity". The criteria of "business activity" (Value Added Tax Act) and "commercial justification" (Federal Act on Direct Federal Tax) are economically oriented and largely congruent.

An art collection can also, in principle, constitute a component of the company within the meaning of the Value Added Tax Act. If the FTA disputes the deductibility of the input taxes, it must…