Federal Supreme Court, 17.12.2025, 9C_570/2025, 9C_571/2025
Facts
The A. Foundation is a public-interest foundation active primarily in developing countries, where it supports entrepreneurial projects aimed at creating jobs and fighting poverty, notably through loans, coaching, and connecting entrepreneurs with investors. It is exempt from direct taxes due to its public-interest purpose.
Between October 2019 and January 2020, the Federal Tax Administration (FTA) conducted a VAT audit covering the 2014 to 2018 periods. Following this audit, the FTA retroactively registered the Foundation as a taxable entity as of January 1, 2014, and, after an objection procedure, demanded payment of CHF 456,037 plus interest.
The Foundation challenged this assessment before the Federal Administrative Court (FAC). The court partially upheld its appeal, finding that the majority of the disputed financial flows constituted donations not subject to VAT. However, it charged 40% of the legal costs to the Foundation and awarded it reduced legal fees.
Two appeals were subsequently filed with the Federal Supreme Court: the FTA challenged the tax classification of the various financial flows (9C_570/2025), while the Foundation contested only the allocation of costs and legal fees decided by the FAC (9C_571/2025). The Federal Supreme Court joined the two cases.
Legal Analysis
The Federal Supreme Court first reiterates that VAT requires an exchange relationship between a service and a consideration, characterized by an internal economic link: the service must be provided with the intent of obtaining remuneration.
Donations, by contrast, do not constitute consideration and are exempt from VAT. They are defined as voluntary contributions made with the intent to enrich the beneficiary without expecting anything in return. To determine whether a payment is a donation or consideration, one must adopt the donor's perspective and assess the specific circumstances. When benefits are granted in return, it must be examined whether they exceed what is socially customary in the relevant context; if so, it can be presumed that the payment was made to obtain these benefits, rendering it taxable.
The Federal Supreme Court also clarifies the scope of publication services within the meaning ofArt. 21 para. 2 item 27 of the VAT Act. These are services through which a public-interest organization acknowledges the support of a third party to enhance its image, without advertising the third party's products or services. Contrary to the FTA's argument, it is not necessary for the financial support to be explicitly mentioned: it is sufficient that the context makes it recognizable to the public that it is a form of partnership or support.
Finally, regarding legal costs, the Federal Supreme Court notes that the judge has broad discretion. However, in pecuniary disputes where the financial outcome is clearly measurable, this outcome must play a predominant role in the allocation of costs.
Application to the case at hand
Regarding payments from members of the so-called "B." circle, members committed to paying high annual amounts in exchange for invitations to exclusive events, including a weekend at a five-star hotel, as well as other forms of recognition and privileged access. The FTA argued that these constituted taxable consideration. However, the Federal Supreme Court upheld the Federal Administrative Court's analysis: in the context of a fundraising strategy targeting high-net-worth donors, such benefits remain within the scope of what is socially customary for donor retention. Above all, the value of these benefits is disproportionate to the amounts paid, confirming that the members' primary intention was to support the Foundation's mission rather than to obtain services. These payments must therefore be classified as donations.
The same reasoning applies to "individual donors" who, while not members of the B. circle, were also invited to fundraising events. Even if, in some cases, the costs of these events exceeded the donations received, there was no evidence to conclude that a significant portion of participants were simply seeking to "buy" access to these events.
Regarding payments from "partner organizations," the Foundation listed these entities on its website with their logos and a link. The FTA viewed this as a taxable advertising service. The Federal Supreme Court, however, confirmed that this constitutes a publication service excluded from VAT: in the context of a public-interest foundation's website, such mentions allowed the public to reasonably understand that these were partners supporting its mission, rather than a promotion of products or services.
Finally, regarding the CHF 2.9 million paid by Foundation C., a related foundation sharing the same premises, the FTA claimed that these payments were compensation for services provided by Foundation A. The Federal Supreme Court confirmed that the FTA failed to provide sufficient evidence of the existence of such services. These payments must therefore be classified as non-consideration.
Given this classification, the Foundation did not reach the turnover threshold justifying VAT liability for the years 2015 and 2016.
Regarding the legal costs before the Federal Administrative Court, the Federal Supreme Court deemed the allocation unsustainable. Although the Federal Administrative Court had ruled on numerous legal issues, the Foundation had prevailed on approximately 95% of the disputed value. In a quantifiable tax dispute, this result should take precedence over a simple count of legal points won or lost.
Outcome
The Federal Supreme Court dismissed the FTA's appeal on the merits. However, it upheld the Foundation's appeal regarding costs and legal fees, set aside the Federal Administrative Court's decision on this point, and remanded the case for a new decision.
The costs of the federal proceedings (CHF 7,000) are to be borne by the FTA, which is also ordered to pay the Foundation a party compensation of CHF 14,000 for the proceedings before the Federal Supreme Court.
Silex Tax Newsletter published in collaboration with Anna Vladau, Attorney at Law
