Decision on Input Tax Deduction Reduction for a Research Foundation

Facts

The [Z.] Research Foundation for Plant Protection and Seeds, a foundation pursuant to Art. 80 CC, was dissolved and its assets were transferred to the [X.] Research Foundation. The Federal Tax Administration reduced the input tax deduction of the foundation, as it partially financed the research activities from its own funds and did not consider these as taxable supplies. The [X.] Research Foundation as the legal successor filed a complaint against this reduction.

Considerations

The Federal Supreme Court dismissed the complaint. It found that the [X.] Research Foundation had taken over the [Z.] Research Foundation for Plant Protection and Seeds with its assets and liabilities and thus entered into its rights and obligations in accordance with Art. 23 para. 2 VATO. Regarding the input tax deduction, the court decided that it is only permissible for taxable supplies and services and that there must be an objective economic connection between input and output transactions. As the…