Restriction of the Right to Deduct Input Tax on Business Expenses

Facts

The Swiss Hotel Association, Hotel A, and Catering Company B. AG applied to the Federal Tax Administration for a declaratory decision that the restriction of the right to deduct input tax on expenses for accommodation, meals, beverages, and transportation for business trips to 50 percent of the corresponding tax amounts (Art. 30 para. 2 VATO) is unconstitutional. The Federal Tax Appeal Commission upheld the appeal and overturned the objection decision. The Federal Tax Administration then filed an administrative court appeal with the Federal Supreme Court.

Considerations

The Federal Supreme Court upheld the appeal and ruled that the appellants can only claim a possible input tax deduction of 50 percent of the corresponding tax amounts on expenses for meals and beverages from January 1, 1995 onwards; the same applies to the expenses for accommodation and transportation incurred in 1995 for their own business trips and those of their personnel. The Federal Supreme Court stated that the Federal Council has a margin of discretion in the Value Added Tax Ordinance that corresponds to that of the legislator. In the view of the Federal Supreme Court, the restriction of the right to deduct…