The Federal Court has ruled! - Discretionary assessment of the value-added tax was permissible

Taxable persons must submit their accounts to the Federal Tax Administration (ESTV) for verification of the tax and the permissible input tax deduction. If this obligation is not fulfilled, the ESTV may carry out an assessment based on estimation.

ESTV can make an assessment based on estimation

Anyone who is subject to VAT must submit the necessary documents to the Federal Tax Administration (ESTV) for review of tax payments and permissible input tax deductions. If the taxpayer fails to fulfill this obligation and there are no records or only incomplete records, or if the reported results clearly do not correspond with the actual circumstances, ESTV assesses the tax claim at its discretion (Art. 79 VAT Act). The tax claim is estimated as a balance.

Dismissed before the Federal Court

As an assessment based on estimation was carried out, restaurant owners unsuccessfully pursued legal proceedings. In the judgment 2C_885/2019 of March 5, 2020, the Federal Court supported the assessment of the previous instance and found the assessment based on estimation to be lawful. The ESTV had made an assessment based on estimation in the corresponding case because there were no proper records from the restaurant or a difference of about CHF 50,000 between the VAT settlement (approx. CHF 150,000) and accounting (approx. CHF 100,000). Consequently, the ESTV made an estimation based on the cost of sales and direct expenses according to the accounting. The classification made was unsuccessfully contested before the Federal Administrative Court and the Federal Court.

Assessment based on estimation permissible

The Federal Court states in its considerations that an assessment based on estimation is permissible if the taxpayer has not fulfilled his obligation to record and keep documents, if the details necessary for taxation are not evident from his books and records, or if the accounting for other (formal) reasons offers no guarantee of its correctness. Likewise, the assessment based on estimation is lawful if the results arising from the accounting, even if formally properly conducted, obviously do not correspond to reality. In the mentioned case, there was a lack of a cash register book, and the cash account showed a negative balance, although this account, since it captures the cash movements of a business, necessarily must have a positive debit balance. These facts, along with the lack of further documents, rightly led to an assessment based on estimation.

Findea helps you keep your taxes simple and hassle-free.