VAT / Branchen Brochure
7.3.2.3 Irrevocable Trust / Change in practice
This concerns the VAT treatment of "Irrevocable Trust" (Branchen Brochure Section 7.3.2.3). The change was made as a result of a review of the practice by the FTA: If the majority (more than 50%) of the beneficiaries are domiciled abroad (head principle), the trust is attributable to a foreign country. The services provided to the trust pursuant to Article 8 paragraph 1 VAT Act are therefore deemed to be provided abroad and are not subject to domestic tax. In the case of irrevocable discretionary trusts, the beneficiaries are not necessarily designated or determinable. If the beneficiaries are not determined and also not determinable, the domicile of the trustee (or trustees) is to be used for the local allocation of the trust. In the case of banks, Form T in accordance with Article 41 CDB serves as suitable evidence for proving the assignment of the trust to a foreign country. If a specific beneficiary or beneficiaries are indicated in point 4 a) of Form T, the domicile or residence/registered office of this/these beneficiary/beneficiaries must be taken into account for the purpose of assigning the trust to Switzerland or abroad. Any information given in item 4 b) of Form T is irrelevant for the purpose of allocating the trust to Switzerland or abroad. For more, see following links (in German):
Our commentary
This is good news! Apparently, the efforts of the banks and the fiduciary industry have helped to implement the change in practice in the sense of a pragmatic solution. It should be however noted that the legal basis is the Value Added Tax Act (VAT Act) and the implementing Value Added Tax Ordinance (VAT Ordinance). The information in the industry brochures is to be understood as the FTA's explanations of the VAT Act and the VAT Ordinance. Administrative practice is subject to continuous change. For this reason, the FTA does not guarantee the unrestricted completeness of the published texts. The self-assessment principle applies.
