Facts
The Swiss Paralympic Committee, a non-profit foundation, was established by the Swiss Paraplegic Association and the Swiss Association for Disabled Sports. The foundation has been registered in the VAT register since January 1, 1995. In February 1999, the Federal Tax Administration conducted an audit of the accounting periods from the 1st quarter of 1995 to the 4th quarter of 1998 and demanded VAT of a total of Fr. ***.--. The foundation took the view that the services were provided in fulfillment of the foundation's purpose and disputed the input tax calculation.
The Federal Tax Administration demanded amounts from the foundation for taxable services, taxable sponsoring, and sponsoring by offsetting advertising services. The foundation lodged an appeal and requested that the decision be revoked, with the exception of the additional demand under item c, and that the full input tax be credited.
The Federal Tax Appeals Commission partially lifted the appeal decision and referred the matter back to the Federal Tax Administration for recalculation of the VAT owed. The Federal Tax Administration filed an administrative appeal with the Federal Supreme Court and requested that the decision of the Federal Tax Appeals Commission be revoked.
Considerations
The Federal Supreme Court examined the administrative appeal and found that the lower court had rightly qualified the annual contributions of the founders as non-taxable consideration. However, the lower court was wrong in stating that the annual contributions of the founders were no longer to be taken into account when calculating the input tax deduction reduction.
The Federal Supreme Court discussed the legal basis for input tax deduction and found that an input tax deduction is only possible if the VAT-liable person uses the input service for taxable…