Foundations… Quo Vadis?

Since 2010 it has been undisputed that non-considerations (with the exception of subventions), including donations, no longer result in a reduction of the input tax. However, it has not been established what influence donations have on the qualification as business and non-business activities and what significance this has for the tax liability of foundations. The FTA tried to remedy this legal uncertainty with the 25/75% rule; but the FTA’s practice has been designated by the Federal Administrative Court as not in compliance with the law (cf. also the blog: Even below 25% there is tax liability).

In connection with a partial revision of the VAT Law the Federal Council has proposed in the consultation paper dated 6 June 2014 the following new clause in the law (Art. 10 Para. 1quater):

The financing of an enterprise by non-considerations in accordance with Art. 18 Para. 2 does not exclude tax liability.

With this new clause in the law – contrary to the FTA’s present practice – the business activity and therefore the tax liability of e.g. a foundation as a result of museum entry charges with option would also be affirmed, if it is financed more than 75 % by donations. But this new clause in the law will – as now – not have the effect that the tax liability of clearly distinguishable ancillary museum businesses (e.g. museum shop, cafe, etc.) contribute to the tax liability of the foundation as a whole.

However, the present practice for charitable organisations, which in principle accept donations, would remain unchanged despite the new clause in the law. By accepting donations and passing them on to finance ancillary projects no services against consideration are rendered. Therefore a business activity is lacking and therefore also tax liability. And without tax liability there is no opportunity for input tax deduction.

Dieser Beitrag wurde unter English, Litigation, VAT consulting abgelegt und mit , , verschlagwortet. Setze ein Lesezeichen auf den Permalink.

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