Swiss Federal Supreme Court, 17.11.2025, 9C_370/2025
Facts
A Swiss limited company (the appellant) is engaged in the purchase of breeding rights for thoroughbred stallions from foreign owner syndicates and the subsequent resale of these rights. For marketing purposes, it mandates agents (stud farm managers) abroad who organize the breeding process for local mare owners.
Following an audit for the years 2015 to 2017, the Federal Tax Administration (FTA) classified the acquisition of these breeding rights as services obtained from abroad. It determined that these services were subject to acquisition tax in Switzerland and demanded CHF 2,749,169 in VAT from the company.
The company challenged this decision, but its appeal was rejected by the Federal Administrative Court. It has therefore appealed to the Federal Supreme Court.
Legal Analysis
The dispute concerns the legal classification, for VAT purposes, of the acquisition of breeding rights from a foreign entity. Three main questions are examined:
- Indirect representation (Art. 20 VAT Act) : For VAT purposes, a service is attributed to the person who appears to third parties as the provider. In a tripartite relationship (indirect representation), there is a service provided between the actual supplier and the intermediary, and another between the intermediary and the final recipient. For indirect representation to exist, the service provided by the representative to the final recipient must, among other things, be economically identical to the one received from the represented party.
- Distinction between supply of goods and supply of services (Art. 3(d) and (e) VAT Act) : A transaction is either a supply of goods or a supply of services. A supply of goods consists of (1) granting the power to dispose of an item economically, (2) handing over an item on which work has been performed, or (3) making an item available for use or enjoyment. Any transaction that is not a supply of goods is a supply of services. Services provided by a foreign company to a recipient in Switzerland are subject to acquisition tax (Art. 45(1)(a) VAT Act).
- Exclusion from the scope of tax (Art. 21(2)(19)(e) VAT Act) : Transactions carried out on the money and capital markets, particularly those involving securities, book-entry securities, or derivatives, are excluded from the scope of VAT. To be classified as such, a transaction must exhibit the characteristics of a financial product, typically a standardized right suitable for mass trading.
Application to the specific case
The Federal Supreme Court analyzes and rejects the appellant's three arguments in turn:
- Absence of indirect representation : The Federal Supreme Court finds that the service the appellant acquires (the mere breeding right) is not identical to the one its agent provides to mare owners. The agent offers a comprehensive and economically distinct service that includes not only the breeding right, but also the organization of the stallion's arrival, the stabling and preparation of the mare, and the work of the stud groom. As the condition of identity of services is not met, the hypothesis of indirect representation is dismissed.
- Classification as a supply of services The Federal Supreme Court has confirmed that the acquisition of a breeding right constitutes a service. It does not qualify as a supply of goods within the meaning of Art. 3 let. d of the Swiss Value Added Tax Act (VATA), as the appellant neither acquires the power to dispose of the stallion economically (item 1), nor a right of use or enjoyment of the animal comparable to a lease (item 3). Furthermore, no work is performed on the stallion on behalf of the appellant (item 2). The subject of the contract is the intangible right linked to the stallion's reproductive capabilities, not the animal itself. Consequently, it is classified as a service.
- Inapplicability of the exclusion for financial instruments : The Federal Supreme Court ruled that breeding rights do not constitute financial instruments. Unlike securities or derivatives, they are not standardized products offered to a large number of investors on an open market. These are specific commercial transactions involving the purchase and resale of rights, rather than capital market operations.
Outcome
The Federal Supreme Court concluded that the acquisition of breeding rights constitutes a service provided by a foreign company, with the place of supply located in Switzerland at the appellant's registered office. This transaction is therefore correctly subject to acquisition tax.
The appeal is dismissed.
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