Consideration tax on services of a foreign parent company to a Swiss branch of an EU insurer; limitation period for tax period 2010 partially upheld

Facts

Parties and subject matter of the proceedings: The appellant is the Swiss branch [V.] (hereinafter the Branch [V.] ) of an insurance company with its head office in [U.] (Belgium), which belongs to the globally active insurance group [B.] . It is authorised or registered in Switzerland for sickness and accident insurance. The respondent is the Swiss Federal Tax Administration (FTA). The dispute concerns consideration taxes (VAT) for the tax periods 2008-2009 and 2010-2012. The prior instance was the Federal Administrative Court, Division I, by judgments of 27 May 2020 (A-5786/2018 and A-5789/2018).

Business activities: The Branch mainly conducted the so-called CGHB business (insurance solution for internationally active expatriates of companies) and, to a lesser extent, the so-called IPMI business (international individual policies for private customers).

Course of proceedings: By voluntary disclosure of 23 December 2013 and supplement of 31 January 2014, the Branch reported consideration taxes on services of [C.] Ltd. (Great Britain) under Service Agreement No. 3 and on administrative costs of the head office under Service Agreement No. 5. On 8 October 2015 the FTA declared all payments taxable and on 28 September 2017 issued decisions. The objection decisions of 6 September 2018 confirmed consideration taxes totalling CHF 481,215.00 (2008/2009) and CHF 718,516.00 (2010-2012), in each case plus default interest. The appeals to the Federal Administrative Court were dismissed.

Requests before the Federal Supreme Court: Main request: to set the tax claim at CHF 0.00 and to order a refund. Alternative request: assessment at lower amounts (CHF 76,214.90 to CHF 154,188.02). Subsidiary alternative request: start of interest from November 2015.

Main points in dispute: Who is the insurer and who receives the services; whether Art. 20 VATA (agency) and Art. 8 CC (place of supply) apply; whether the dual-entity principle is violated; whether the tax exemption for insurance agents (Art. 21 para. 2 no. 18 VATA) applies; violation of the requirement of expedition (Art. 29 para. 1 Cst.); limitation of the tax claim for 2010.

Considerations

Procedure and admissibility of the appeal: The Federal Supreme Court joins the two appeals against the two judgments of the Federal Administrative Court into one proceeding (Art. 71 FSCA in conjunction with Art. 24 FCPA). The appeal in public law matters against final decisions of the Federal Administrative Court is admissible (Art. 82 let. a, Art. 86 para. 1 let. a, Art. 90 FSCA). The Federal Supreme Court examines only the complaints raised (Art. 42 FSCA) and is bound by the prior instance's findings of fact, unless they are manifestly incorrect, i.e. arbitrary (Art. 105, Art. 97 para. 1 FSCA).

Requirement of expedition: The complaint of a violation of Art. 29 para. 1 Cst. is problematic in view of the prohibition of novelties (Art. 99 para. 1 FSCA) and good faith, since the appellant did not complain about the duration of proceedings before the prior instance. The question may be left open, as the requirement of expedition has not been violated: the cases were complex, the appellant submitted evidence subsequently and took its time, and the objection proceedings lasted only about one year. Art. 6 no. 1 ECHR is not applicable to tax disputes.

Factual complaints regarding the person of the insurer and the recipient of the services: The prior instance was entitled to find without arbitrariness that the Branch acts towards customers in Switzerland in its own name and for its own account as insurer. Insurance supervisory law (direct insurance agreement with the EU, Art. 2 para. 1 let. b IOA, Art. 1 IOO) requires EU insurers to conduct business in Switzerland through an agency or branch. Moreover, the appellant must prove the tax consequences of the head office's external appearance as a fact giving rise to a tax exemption (Art. 8 CC; objective burden of proof). Service Agreement No. 3 names the Branch as contracting party and recipient of the services, and Appendix 2, Exhibit 3 expressly states that the services are provided only to the Swiss Branch. The complaints are unfounded.

Art. 20 VATA and Art. 8 CC: Art. 20 para. 3 VATA (indirect agency) is invoked inconsistently, as it presupposes that the agent acts in its own name for the account of another, whereas the head office is simultaneously supposed to act as insurer. Since the Branch acts in its own business, Art. 20 VATA does not apply. The place of supply is determined by the recipient principle (Art. 8 para. 1 VATA); since the recipient is the Branch in Switzerland, the place lies in Switzerland.

Dual-entity principle and Art. 10 para. 3 VATA, Art. 7 VATO: The dual-entity principle need not be invoked, since the service was provided by a separate legal person with its seat abroad. Art. 10 para. 3 VATA and Art. 7 VATO concern other constellations.

Art. 45 VATA and discrimination: The application of Art. 45 VATA in conjunction with Art. 8 para. 1 VATA is correct. The cost advantage within a domestic VAT group (Art. 13 APA) is intended by the legislator and must be accepted under Art. 190 Cst.

Tax exemption for insurance agents (Art. 21 para. 2 no. 18 VATA): The concept of insurance agent is to be interpreted according to insurance law understanding (Art. 34 IPA, Art. 40 IOA). Decisive is that the activity causally contributes to the conclusion of specific insurance contracts; mere typical auxiliary services such as administration, claims handling or premium collection are not sufficient. The prior instance was entitled to find without arbitrariness that [C.] Ltd. did not act as an insurance agent: the appellant submitted no evidence of specific sales support activities, although it bore the burden of proof and the duty to cooperate. The articles of association of [C.] Ltd. and the report for the 2016 business year are insufficient. Nor do the exemption under Art. 21 para. 2 no. 19 let. d VATA or the…