Facts
The HC [X.] Management AG and the HC [X.] Sport AG, two hundred percent subsidiaries of the Hockey Club [X. AG] , are sister companies registered in the register of value added tax payers. The Management AG provides the Sport AG with infrastructure and services, particularly in the areas of marketing and sponsoring. The Sport AG operates the ice hockey professional game operation and has the license to participate in the championship. The sister companies have concluded a service and management contract that regulates the division of tasks and compensation.
The Federal Tax Administration (FTA) conducted a value added tax audit and found that the sister companies had not correctly booked their sales and expenses. The FTA therefore made a credit and a subsequent charge. The sister companies lodged a complaint against these decisions and argued that the FTA had inadmissibly applied two different methods to reduce the input tax.
Considerations
The Federal Court dismissed the complaints and confirmed the judgments of the lower instances. It found that the sister companies are considered closely related persons and must therefore tax their services at arm's length. The input tax is to be reduced in proportion to the use if the input tax-charged services are used for both taxable and exempt sales.
The Federal Court also found that the FTA had applied the correct method to reduce the input tax. The FTA used the uniform key determined on a…