Facts

The taxpayer, a public limited company based in [S.] /BE, which primarily operates mountain railways and sports facilities, faced economic difficulties during the tax periods 2011 to 2015. On 16 May 2011, a civil court ordered provisional debt moratorium, followed by a definitive debt moratorium until 16 June 2012. The Federal Tax Administration (FTA) registered outstanding tax claims in the second class, including CHF 742,045.60 for the fourth quarter of 2010 to May 2011.

As part of the restructuring, the Confederation, the canton and the municipality waived loan claims totalling CHF 8,676,335.-- in favour of the taxpayer without receiving shares in return. In addition, the share capital was reduced from CHF 16,870,000.-- by 90 % to CHF 1,687,000.-- and later increased to CHF 7,687,000.-- through a capital increase of CHF 6,000,000.--. This enabled the conclusion of a composition agreement with a composition dividend of 3.6788 % for the unsecured creditors, while the FTA, as a privileged creditor, received its claims in full.

The FTA conducted a review for the tax periods 2011 to 2015 and determined a subsequent charge of CHF 283,926.--. This was based on the fact that the taxpayer had declared input tax for the tax period 2012 amounting to CHF 563,863.-- which was to be reduced by CHF 208,314.--. The FTA qualified the debt waivers as public-law subsidies and argued that the flow of funds from the debt waiver constituted a non-consideration. The taxpayer contested the assessment notice and filed an objection, which was unsuccessful.

The Federal Administrative Court partially upheld the appeal: it set aside the objection decision for the tax periods 2011 (due to statute of limitations) and 2012 (due to referral for recalculation of the input tax reduction) but confirmed the decision for the tax periods 2013 to 2015. The taxpayer then filed an appeal with the Federal Supreme Court and requested that the tax claim for the tax period 2012 be set at a maximum of CHF 539,596.--. The FTA requested the dismissal of the appeal and gradually reduced its tax claim for the tax period 2012 to CHF 619,359.--.

Considerations

1. Admissibility of the appeal and subject of appeal

The Federal Supreme Court examines the appeal in public-law matters and finds that the requirements under Art. 82 lit. a, Art. 83 e contrario, Art. 86 para. 1 lit. a, Art. 89 para. 1 and Art. 100 para. 1 FSCA are met. The appeal is directed exclusively against the lower court's considerations regarding the tax period 2012. The referral decision of the Federal Administrative Court is to be regarded as a final decision within the meaning of Art. 90 FSCA, as the matter was referred back to the FTA for recalculation of the input tax reduction. The Federal Supreme Court admits the appeal.

2. Admissibility of the FTA's applications in the federal court proceedings

The FTA has repeatedly reduced its tax claim for the tax period 2012 during the proceedings, which is permissible and does not constitute a cross-appeal. Pursuant to Art. 107 para. 1 FSCA, the Federal Supreme Court may not rule beyond the parties' applications. If the FTA were to prevail, its tax claim could at most be set at CHF 619,359.--. The taxpayer, for its part, requests a maximum assessment of CHF 539,596.--.

3. Applicable law and scope of review

The Federal Supreme Court applies federal legislation ex officio (Art. 106 para. 1 FSCA) and reviews it with full cognition (Art. 95 lit. a FSCA). Value added tax is structured as an all-phase tax with input tax deduction (Art. 1 para. 1 VATA 2009) and is intended to tax non-business final consumption in the country (Art. 1 para. 1 sentence 2 VATA 2009). Input tax deduction is possible pursuant to Art. 28 para. 1 VATA 2009 provided that the input tax has been paid and borne economically. Exceptions to input tax deduction require an explicit statutory basis, as provided for in Art. 29 VATA 2009 and Art. 18 para. 2 VATA 2009.

4. Qualification of debt waivers as public-law subsidies

The debt waivers…