Facts
The Federal Tax Administration had qualified [A. AG] as a domiciliary company and asserted a withholding tax claim. [A. AG] had paid franchise fees to [B.] Ltd., which the Federal Tax Administration considered not to be commercially justified. The Federal Administrative Court had overturned the Federal Tax Administration's decision and considered the payments to be commercially justified.
The Federal Tax Administration filed an appeal in public law matters with the request to overturn the judgment of the Federal Administrative Court and to confirm the decision of 23 May 2007. The respondent requested the dismissal of the appeal.
Considerations
The Federal Court examined the admissibility of the appeal and found that the appellant was entitled to appeal in public law matters. It based its decision on the facts established by the lower court and examined the appellant's complaint that the contested decision violated federal law.
The Federal Court found that the respondent had fulfilled its duty to provide information and cooperate, and that the Federal Tax Administration had not provided evidence that the payments to [B.] Ltd. were not commercially justified. It pointed out that the taxable company had to provide proof of the expense character of services and that the tax authority had to ensure that only commercial reasons were decisive for a particular service.
The Federal Court examined the franchise agreement between [A. AG] and [B.] Ltd. and found that the services and counter-services of [A.] were qualitatively the same as those of the sub-franchisees. It…