Facts
The former members of a value added tax group (consisting of a sole proprietorship, a general partnership and two public limited companies) filed an appeal with the Federal Tax Administration (FTA) against the assessment of additional value added tax for the tax periods 2005 to 2009. The tax group was registered as a single taxable person in the register of domestic taxpayers until 31 December 2012 and accounted for value added tax using the effective method.
As part of an audit by the FTA for the tax periods from the first quarter of 2005 to the fourth quarter of 2009, additional assessments amounting to a total of CHF 1,159,841.- plus late payment interest were imposed. The former group members contested this decision and filed an objection, which was partially upheld. They appealed the objection decision of 10 September 2020 to the Federal Administrative Court, which, with a judgment of 21 November 2022, partially upheld the appeal and declared the tax periods 2005 and 2006 to be absolutely time-barred. The appeal regarding the tax period 2007 was dismissed.
The former group members filed an appeal with the Federal Supreme Court and requested a determination of the time-barred tax claims for the years 2005 and 2006 as well as a reduction of the additional assessment for 2007. They did not file any requests for the tax periods 2008 and 2009. The FTA requested that the appeal be dismissed as it lacked a legitimate interest.
Considerations
The Federal Supreme Court first examined the admissibility requirements of the appeal in public law matters. It confirmed that the former group members are capable of being parties as legal successors of the dissolved value added tax group, since the group’s capacity to be a party ceased upon its deletion from the register and the members now act as independent taxable persons. The right to file an appeal was recognised for the tax periods 2005 to 2007, as the former group members were particularly affected by the contested decision and had a legitimate interest in the annulment or amendment of the decision.
The central issue in the substantive examination was the question of the absolute limitation of the tax claims. The Federal Supreme Court found that limitation must be examined ex officio, as the FTA acts as the creditor of a public-law claim. For the tax periods 2005 to 2007, the VATA 1999 applied, which provided for an absolute limitation period of 15 years. The period began on the expiry of the calendar year in which the tax claim arose. For the tax periods 2005 and 2006, the limitation had already taken effect on 1 January 2021 and 2022 respectively, and for 2007 on 1 January 2023.
The Federal Supreme Court explained that absolute limitation irrevocably extinguishes the tax claim and no natural obligation remains. A determination of the amount of the time-barred tax claims is not provided for, as the legislator deliberately aimed for a final solution with the limitation rules. The former group members were unable to demonstrate a legitimate interest in the determination of the time-barred claims, as no concrete uncertainties or future claims were asserted. Therefore, there was no entitlement to file an appeal regarding the tax periods 2005 and 2006.
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