Value added tax on precious metal deposit and withdrawal transactions: No supply and no consideration upon deposit, partial approval of the appeal by the Federal Tax Administration due to limitation

Facts

Parties: The Swiss Federal Tax Administration (ESTV), Main Division Value Added Tax, as appellant; [A. AG] , represented by attorney Dr. iur. Tobias Rohner, as respondent. The lower court was the Federal Administrative Court, Division I (judgment of 6 May 2020, A-5601/2019).

Subject matter: Value added tax, tax periods 2011-2014.

Facts: The respondent has been registered as a VAT-liable person since 1 January 1995, previously as a goods turnover tax liable person. It is a member of the ASFCMP and part of an international group. From 15 to 19 February 2016, the ESTV conducted an audit for the years 2011-2014. By assessment notice, it demanded VAT of CHF 15,168,014.--. After the respondent disputed the assessment and requested a decision, the ESTV reduced the amount to CHF 10,955,399.-- by decision of 24 September 2019. The Federal Administrative Court treated the objection as a direct appeal, approved it and set aside the decision. By appeal in public law matters of 11 June 2020, the ESTV requests that the lower court's judgment be set aside and its decision be confirmed; the respondent requests non-entry, alternatively dismissal.

Subject matter of the dispute: The scope of the respondent's taxable supplies to its customers and the measurement of VAT thereon. In dispute are (1) deposit and withdrawal transactions involving industrial and precious metal waste, (2) deposit and withdrawal transactions involving pure precious metal between market participants, (3) pure withdrawal transactions involving precious metal where initially only a credit on the metal account is requested.

Business model: For precious metal waste, the respondent credits the weight without monetary credit or stated value; the metals are passed to group companies or third parties for refining. No VAT is charged on the metal value, but VAT is charged on the contract fee. For pure withdrawal transactions, the material value is always invoiced with VAT, except for gold exempt from tax (Art. 44 VATO).

Complaints of the ESTV: (a) Manifestly incorrect establishment of facts due to alleged invoice-replacing credit notes and input tax deduction; (b) incorrect interpretation of the concept of economic power of disposal; (c) input tax deduction for import taxes in connection with processing abroad; (d) tax avoidance; (e) offsetting of input taxes of CHF 4,904.85 (year 2011: CHF 1,112.--).

Considerations

1. Admissibility The judgment of the Federal Administrative Court is a final decision in a public law matter (Art. 82 lit. a, Art. 86 para. 1 lit. a, Art. 90 FSCA). The ESTV is entitled to appeal under Art. 89 para. 2 lit. a FSCA in conjunction with Art. 141 VATO; the appeal was filed within time and in proper form (Art. 100 para. 1, Art. 42 FSCA). The appeal is admitted.

2. Scope of review The Federal Supreme Court is bound by the facts established by the lower court (Art. 105 para. 1 FSCA). A correction is only possible in cases of manifest error (arbitrariness) or a violation of law within the meaning of Art. 95 FSCA with decisive significance (Art. 105 para. 2, Art. 97 para. 1 FSCA). The parties must substantiate how the facts are to be supplemented. Complaints concerning fundamental rights must be precisely reasoned (Art. 106 para. 2 FSCA). The Federal Supreme Court is not bound by the parties' arguments and may decide on the basis of different reasoning (substitution of grounds).

3. Complaint regarding the facts (invoice-replacing credit notes) Under Art. 3 lit. k VATA, an invoice is any document by which the consideration for a supply is billed. Credit notes may be equated with invoices. A VAT-compliant invoice is an important indication of the supply being provided (Art. 26 para. 2 VATA). An incorrect invoice may give rise to a tax liability ('impôt facturé = impôt dû', Art. 27 paras. 2 and 3 VATA; BGE 144 II 412). However, the ESTV has not proven that the respondent credited the material value in money upon deposit and claimed input taxes. The 'Facture' confirmations only stated the estimated weight and no VAT; they do not meet the requirements for an invoice (Art. 26 para. 2 lit. f VATA). The complaint regarding the facts is unfounded.

4. Economic power of disposal A supply under Art. 3 lit. d VATA exists upon the conferral of the ability to dispose economically of an item in one's own name (no. 1), upon delivery of a processed item (no. 2), or upon transfer for use (no. 3). The supply and the consideration must be in a reciprocal relationship (internal economic connection, from the perspective of the recipient of the supply, Art. 3 lit. f VATA; Art. 18 para. 1 VATA). Economic power of disposal exists where the acquirer can consume or use the item for its own benefit or return it to the economic cycle in its own name. It usually coincides with the transfer of ownership, but is not necessarily dependent on it. Administrative directives (VAT Info 04) do not bind the courts but must be considered insofar as they constitute a convincing concretisation (BGE 146 I 105 E. 4.1). The cited passages primarily concern coins and fine gold and do not directly regulate the power of disposal in deposit and withdrawal transactions. The unpublished practice of the ESTV has only the value of a party assertion.

5. Result regarding the power of disposal On the basis of the contractual documents (terms for metal accounts of 10 November 2010), the lower court established that the congruent will of the parties did not provide for a transfer of economic power of disposal to the respondent. This factual finding binds the Federal Supreme Court. The respondent did not acquire civil law ownership: there is no causa (principle of causality), no agreement within the meaning of a depositum irregulare (Art. 481 para. 3 CO), and no other transfer of ownership. Mere commingling establishes co-ownership of the customers (Art. 727 para. 1 CC by analogy, Art. 484 CO by analogy). The burden of proof for facts increasing the tax lies with the ESTV (norm theory). The customers also retained the value risk, since only the weight was stated. The respondent's supply was exhausted in the delivery of a processed item (Art. 3 lit. d no. 2 VATA); for the material there was no consideration…