Facts
The bourgeois municipalities of [B.] , [C.] , [D.] , [E.] and [F.] entered into an agreement on 1 April 2005 constituting the Forestry District [A.] , in order to rationalise the surveillance, maintenance and exploitation of their forest estates. The bourgeois municipality of [G.] joined it as early as 2012. The district is registered with the Federal Tax Administration as a public-law entity subject to VAT. A new agreement entered into force on 1 January 2012.
During a VAT audit covering the years 2010 to 2014, the Federal Administration found that the district had not subjected to tax the amounts paid by the Canton of Valais and by the municipal and bourgeois municipalities for the management of protective forests, measures in favour of biodiversity and forest policing. By notice of estimate of 6 October 2015, it fixed the tax correction at CHF 220,359. After objection and complaint by the district, the Federal Administration confirmed its decision on 28 March 2017.
The Federal Administrative Court partially upheld the district's appeal on 28 February 2019. It held that the amounts paid for protective forests and biodiversity constituted subsidies not subject to VAT, the beneficiary being the district and not the bourgeois municipalities, relying on the service contracts concluded with the Canton of Valais. It did, however, dismiss the appeal concerning the contribution to the forest ranger's salary, a point no longer in dispute before the Federal Supreme Court.
The Federal Administration lodges a public law appeal and requests the partial annulment of the judgment and confirmation of its decision on complaint. The Federal Administrative Court waives submitting observations and the district does not respond within the time limit set.
Main question: are the amounts received by the district for protective forests and biodiversity subsidies not subject to VAT (art. 18 para. 2 let. a VATA) or the consideration for a taxable supply?
Considerations
The public law appeal is admissible, the decision being final, rendered in a public law matter, and the Federal Administration having standing to appeal in VAT matters. The Federal Supreme Court relies on the facts established by the prior authority, save for arbitrariness or violation of law within the meaning of arts. 95 and 97 FSCA, and does not examine purely appellate criticisms. The dispute concerns only the amounts linked to protective forests and biodiversity, the question of the forest ranger's salary not having been contested.
The applicable law is the VATA, as the tax periods 2010 to 2014 post-date the repeal of the former VATA on 31 December 2009. Under art. 18 para. 1 VATA, a supply is taxable when provided against consideration, which presupposes a close economic link between supply and consideration. Art. 18 para. 2 let. a VATA, by contrast, excludes subsidies and other public-law contributions, even when paid under a service mandate. One must distinguish the subsidy, which encourages conduct of public interest without an equivalent economic counterpart, from the acquisition by the State of a concrete and individualised service, which is subject to VAT.
At cantonal level, the FFA and the FFA/VS Act vest forest management in the owners, namely the bourgeois municipalities, the forestry districts being merely third parties entrusted with execution. Arts. 48 and 49 FFA/VS provide for cantonal subsidies of up to 90 per cent of costs and a communal contribution of up to 10 per cent. The Federal Supreme Court notes that the subsidy indeed aims to offset burdens resulting from tasks prescribed by cantonal public law, but that it must still examine whether a service relationship exists, the absence of which is necessary to exclude VAT (art. 29 let. b VATO).
The Federal Supreme Court holds that the beneficiaries of the subsidies are the bourgeois municipalities and not the district. Neither the law nor the agreements expressly designate the beneficiary,…