Swiss VAT reclaim / protection of legal rights

Rejection of VAT refund request and legal protection

Not always is a VAT refund request granted by the Swiss tax authorities. Depending the reasons underlying the rejection the foreign company may have to consider whether it will and what action it can undertake. Such an action could be challenging the rejection by filing an objection.

When a VAT refund request has been rejected by the tax authorities the question rises whether that decision should be challenged or not.
Experiences show that, in comparison with domestic taxable subjects, foreign companies are less willing to challenge decisions of the tax authorities. With this knowledge in mind this may move the tax authorities to apply administrative practices that are not beneficial for foreign companies. Therefore, foreign companies that are confronted with a rejection of their VAT refund request and question on justified grounds that decision, but do not want to litigate, have only few alternatives. One of such alternatives to consider could be to inform the authorities in their home country that are responsible for trade or tax policy.

Distortion of trade

Regulations of national law or administrative practices by tax authorities might be harmful for trade when they effect especially or in most cases foreign traders. For example, where taxable subjects for purposes of Swiss VAT are allowed to recover input VAT on tickets or bills that -under a certain threshold- do not meet the invoice requirements, foreign companies that apply for VAT refund through the refund regulation are not entitled to apply the aforementioned practice rule.

Another example that can be mentioned concerns the qualification of supplies. In the scope of the VAT refund regulation foreign companies are not entitled to refund when they make domestic (in Switzerland) supplies -apart from a few exceptions. When a taxable subject for purposes of Swiss VAT makes a supply that comprises of individual components that are absorbed and flow into a supply with a different character, there are administrative practice rules from which follows that the character of the resulting end-supply is decisive for purposes of VAT treatment. However, when it comes to application of the VAT refund regulation experiences show that the tax authorities assume that the purchased goods and services are resold as such by the foreign company, for which reason this generally leads to a rejection of the VAT refund request.
The exclusion of the supplies by foreign companies that are reverse-charged from the transactions that do not limit the entitlement of foreign companies to apply the VAT refund regulation is a trade barrier, and effects for example foreign companies that purchase and store their goods in Switzerland, and supply them from the warehouse to Swiss corporate customers.

Foreign companies that think that the VAT refund regulation or the administrative practices in that field performed by the Swiss tax authorities impose trade barriers may consider to consult procedures in their home country for reporting them to the competent authorities. By reporting trade barriers the competent authorities are enabled to keep an eye on the application and enforcement of international trade regulations, either with a multilateral character or rather based on bilateral agreements.