Withholding VAT on foreign legal services: Societas as recipient despite the claimed agency or trust structure; company's appeal dismissed

Facts

The appellant, [A.] SE (Societas Europaea) with statutory seat in [U.] (FL), was entered in the Liechtenstein Commercial Register in 2006. The beneficial owner and Chairman of the Board of Directors with sole signing authority in the tax periods 2014 to 2017 was [B.] (the Chairman of the Board). The company resulted from an international merger of a Czech and a Slovak legal entity.

The Czech predecessor company had conducted arbitration proceedings against the Czech Republic, which ended with an arbitral award in 2008. As the Czech Republic did not pay, the Societas, whose sole purpose was enforcing this claim, conducted proceedings in various states and mandated foreign lawyers and advisers there (engagement letters dated 8 April 2011, 12 October 2011, 26 January 2012, 23 March 2012, 24 January 2013, 22 September 2014, 31 January 2017 [two], 23 February 2017 and 19 September 2019).

In November 2013 the Societas sold and assigned the claim to the Chairman of the Board, who passed it on to the [C.] Trust (an irrevocable discretionary trust under Liechtenstein law, beneficiaries: the Chairman of the Board and his daughters). On 29 November 2013 the [D.] Trust reg. (trustee of the [C.] Trust) concluded with the Societas a 'trust agreement and assignment declaration', under which the Societas received the claim in a fiduciary capacity, was permitted to dispose of it as an owner, and could use incoming payments in advance to cover its own liabilities.

On 2 October 2019 the Liechtenstein Tax Administration (LSTV) carried out a VAT audit. By decision of 22 November 2019 the Societas was entered in the register of VAT-liable persons and ordered to pay withholding VAT totalling CHF 221'972.-- for the years 2014 to 2017. The objection (decision on objection of 13 July 2020) and the appeal to the National Tax Commission (decision LSteK 2020/33 of 4 February 2021) were unsuccessful. The Administrative Court of the Principality of Liechtenstein dismissed the appeal by judgment VGH 2021/047 of 30 July 2021.

The Administrative Court found that the invoices were without exception addressed to the Societas, that no express disclosure of an agency relationship was made to the foreign service providers, that the Societas had booked the invoices through profit and loss and had not re-invoiced them, and that the trust was to be treated as non-transparent, so that the residence of the trustees was decisive; the sole trustee was the [D.] Trust reg. with seat in [U.] (FL). It left open whether a fiduciary relationship existed between the Societas and the [C.] Trust.

Before the Federal Supreme Court, the Societas requested that the decision be set aside, or alternatively remanded for supplementation or correct establishment of the facts (in particular regarding the tax domiciles of the trust beneficiaries), and subsidiarily that the withholding VAT be set aside for services of [E.] LLP (UK) and the law firm [F.] (LU). It argued that it was merely a procedural substitute and trustee of a sub-trust, that the beneficiaries of the [C.] Trust were predominantly resident outside the VAT territory, so that the services had not been received domestically; and that it also met the requirements of a passive investment company (domicile company). The Federal Supreme Court dispensed with an exchange of written submissions.

Considerations

Under Art. 1 para. 3 VAT Treaty CH-FL 1994 and Art. 12 VAT Agreement CH-FL 2012, the Federal Supreme Court is the court of last instance insofar as the interpretation and application of the harmonised Liechtenstein VAT law is concerned. The appeal against the final decision of the Administrative Court is admissible as a civil law appeal in public law matters (Art. 82 lit. a, 86 para. 1, 90, 89 para. 1, 100 para. 1 FSCA by analogy). The procedure is governed by Swiss procedural law (lex fori); the Federal Supreme Court examines questions of law freely but is bound by the lower court's findings of fact, since review of facts under Liechtenstein VAT law under Art. 12 first sentence VAT Agreement CH-FL 2012 lies exclusively with the Liechtenstein courts. Exceptions exist only for contradictory or mutually exclusive findings that provide no sufficient basis for the legal assessment.

The objections concerning the facts are therefore immaterial: the Societas did not substantially dispute the findings of the LSTV, and the objections regarding the residence of the beneficiaries raise a pure question of fact. New assertions, such as regarding the absence of capitalisation of the claim or the lack of own assets, are inadmissible due to the prohibition on novelties (Art. 99 para. 1 FSCA).

The elements of withholding VAT (reverse charge) under Art. 45 VATA/FL 2009 require that a non-resident, unregistered entrepreneur provides a service whose place of supply under Art. 8 para. 1 VATA/FL 2009 is domestic (recipient location principle, subsidiary), and that the domestic recipient is fully liable to tax or exceeds the threshold of CHF 10'000; the service must furthermore not be excluded or exempt. The recipient of the service is subject to tax subjectively. The concept of recipient is not defined; it follows general civil law principles, under which legal relationships are in principle attributed to the person in whose name they stand, unless an agency or trust relationship is clearly proven.

The advisory services of lawyers are services (Art. 3 lit. e VATA/FL 2009). Since the invoices were consistently addressed to the Societas, it is in principle to be regarded as the recipient. The invoice counts as an important indication of the recipient of the service, and in the area of withholding VAT the formal…