Facts
Parking Plaine de Plainpalais SA (the taxable person), whose registered office is in Geneva, has been registered for VAT since 1 January 1995. It operates an underground car park on a plot of land owned by the City of Geneva.
By agreement dated 22 and 30 June 1978, the City of Geneva granted a superficies right in favour of the company. The agreement provides that the City waives the right to collect a superficies ground rent for as long as the investments of the superficiary and of the lenders have not yet been recovered and amortised, in view of the public interest in the structure and the economic risks incurred. According to the agreement, the return of the buildings upon expiry of the right takes place without consideration. The right, initially due to run until 2013, was extended to 2043 by amendments dated 1 February and 17 March 1999. No ground rent had been collected as of 2 May 2017.
Following an audit covering the periods 2010 to 2013, the Federal Tax Administration (the tax authority) considered that the taxable person had not reduced its deduction of input tax despite having received a subsidy in the form of a superficies right without ground rent. By decision of 28 June 2016, confirmed on objection on 2 May 2017, it set the tax receivables and the tax correction in its favour at CHF 44,565.
The Federal Administrative Court, seized by the taxable person, upheld the appeal by judgment of 30 January 2019, annulled the decision on objection and remitted the file to the tax authority. It held that the waiver of the ground rent was not a subsidy, because the free grant of the superficies right stood in an exchange relationship with the return of the buildings without compensation.
The tax authority lodges an appeal under public law and requests the annulment of the cantonal judgment, the recognition of a subsidy and the reduction of the deduction of input tax. In the alternative, it requests the remittal of the case for the determination of the value of the subsidies. The taxable person requests dismissal of the appeal.
Considerations
As to admissibility, the Federal Supreme Court notes that a remittal judgment is in principle an interlocutory decision, admissible only under the conditions of Art. 92 and 93 FSCA. It is nevertheless deemed to cause irreparable harm (Art. 93 para. 1 let. a FSCA) where the authority must issue a new decision that it considers contrary to law without being able to challenge it afterwards. In this case, the tax authority had to rule on VAT on the return of the buildings and to adopt the exchange relationship found in the remittal judgment, so the appeal is admissible.
Concerning the violation of the right to be heard (Art. 29 para. 2 Cst.), the Federal Supreme Court dismisses the complaint. The characterisation as a subsidy was the necessary premise for calculating the reduction of the deduction, and the taxable person had contested the very existence of the subsidy in its argument. The Federal Administrative Court was not required to invite the parties to comment on the agreement, which was already on file, and its reasoning, although brief, made it possible to understand its line of thought.
On the merits, a service subject to VAT presupposes an exchange of services, that is, a close economic relationship between performance and consideration, involving equivalent economic values. Public-law subsidies are excluded from the consideration (Art. 18 para. 2 let. a VATA) and entail a proportional reduction of the deduction of input tax (Art. 33 para. 2 VATA). A subsidy is an economic notion, examined in concreto irrespective of its designation, and may be granted by waiving a performance that is due.
The Federal Supreme Court recalls that the superficies right is normally remunerated by a ground rent, which compensates the use of the land, whereas the indemnity on the return of the buildings (Art. 779d CC) compensates the value of the buildings. These two elements are legally independent. To accept an exchange, it…