English translation of Article 38 of the Swiss VAT Act 2010

 
This page contains an English translation of the below Article of the revised Swiss VATA 2010 and is part of a web based Swiss VATA 2010 commentary published in German. Should you require qualified written legal advice on cross-border transactions potentially triggering Swiss VAT  from a Swiss VAT lawyer please do not hesitate to contact: Harun Can

Article 38 of the Swiss VAT Act 2010

Notification procedure (transfer of a going concern)

  1. If the tax calculated at the statutory rate on the sales price exceeds 10,000 Swiss francs or if the sale is made to a closely related person, the taxable person must fulfil his filing and tax payment obligations through notification in the following cases: 
    a. restructuring in accordance with Articles 19 and 61 of the Federal Act of 14 December 1990 on Direct Federal Taxation; 
    b. other transfers of all or part of his business assets to another taxable person in the context of an incorporation, a liquidation, a restructuring or any other legal transaction specified in the Mergers Act of 3 October 2003 [SR 221.301]. 

  2. The Federal Council may determine other cases in which the notification procedure must be, or may be, used. 

  3. The notifications must be made in the course of ordinary filing. 

  4. By using the notification procedure, the acquirer accepts the seller’s assessment basis and the level of use entitling him to an input tax deduction in respect of the assets transferred. 

  5. If in the cases mentioned in paragraph 1 the notification procedure was not applied but security is provided for the tax claim, the notification procedure may no longer be used.


Article 101 of the Swiss VAT Ordinance 2010 (Part of the assets) clarifying Article 38 Section 1 of the Swiss VAT Act 2010

Every smallest unit of an enterprise that is viable by itself constitutes a part of the assets.

Article 102 of the Swiss VAT Ordinance 2010 (Tax liability of the purchaser) clarifying Article 38 Section 1 of the Swiss VAT Act 2010

The notification procedure is also to be used if the purchaser first becomes liable for the tax in connection with the transfer of the totality of assets or part thereof.

Article 103 of the Swiss VAT Ordinance 2010 (Invoice) clarifying Article 38 Section 1 of the Swiss VAT Act 2010

If the notification procedure is used, this must be stated on the invoice.

Article 104 of the Swiss VAT Ordinance 2010 (Voluntary use of the notification procedure) clarifying Article 38 Section 2 of the Swiss VAT Act 2010

Provided both parties are liable for the tax, the notification procedure can be used:

a. On the transfer of a property or parts of a property;

b. Upon application by the transferring person, as long as material interests are given.

Article 105 of the Swiss VAT Ordinance 2010 (Degree of use) clarifying Article 38 Section 4 of the Swiss VAT Act 2010

It is assumed that the seller has used the transferred assets for the businesses entitled to the input tax deduction. A different degree of use must be proved by the purchaser. 

 


Corresponding Article(s) of the EU VAT Directive (Recast) 2006/112/EC (as of January 2010)

There is no corresponding provision.


Possible contractual provision in asset purchase agreement

1.1 VAT or any other taxes of similar nature
 
1.1.1 For tax reasons, the Seller and the Purchaser agree to and shall use their commercially reasonable best efforts to procure that the supply of the Transferred Assets under this Agreement, which would otherwise be chargeable to VAT, is treated as transfer of all or part of the assets of a business as going concern for purposes of the applicable VAT legislation and may therefore be settled by filing a notification (Meldeverfahren) in accordance with Article 38 of the Swiss VAT Act instead of paying VAT. 

1.1.2 If, notwithstanding such efforts, any or additional VAT, sales taxes or any other tax of a similar nature become payable by the Seller with respect to the transactions contemplated in this Agreement (e.g. due to reassessment by the Tax Authorities), such VAT, sales taxes or any other tax of a similar nature (together with any interest and/or penalties relating thereto) shall be borne by the Purchaser in addition to the Purchase Price.  Upon request by the Purchaser, the Seller shall make an appeal against any determination of the Swiss Tax Authority that VAT cannot be settled by filing a notification.

1.1.3 The Seller will issue to the Purchaser an amended or corrected invoice (and, if necessary, adjustment note for VAT purposes) compliant in all aspects with the formal requirements of the VAT law and any other applicable legal requirements.

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