The Swiss federal court recently decided that a gallery owner who had sold pieces from his private art collection to his own gallery generated a profit from an entrepreneurial activity which had to be subject to Swiss value added tax (VAT). The gallery owner had received an advance tax ruling from the cantonal tax authority in charge of his personal tax assessment which confirmed that the sale would qualify as a private capital gain and therefore not trigger income taxes. This, however, did not deter the Swiss federal tax administration (SFTA) from taking a different view and to consider the sale to constitute a self-employed activity and thus trigger VAT.

The judgment

In 2000, X sold 38 pieces of art from his private collection to the gallery he owned. Before doing so, he had requested an advance tax ruling from the tax authority of his canton of domicile (which is in charge of assessing and levying individual taxes) who confirmed that the envisaged sale would be seen as a disposal of privately held movable assets. Under Swiss tax laws this does not lead to income taxation of the capital gain derived. The SFTA, however, took a different view, considering the transaction to be part of the gallery owner’s business activity (and not a mere private disposal) and classified the sale as a supply subject to Swiss VAT.

The Swiss federal court (the supreme juridical authority in Switzerland) confirmed the SFTA’s VAT assessment stating that in order to determine whether an activity constitutes a self-employed or business activity for VAT purposes, the question of whether the taxpayer had an intent of deriving a profit is not decisive. The Swiss federal court acknowledged that the gallery owner had not borne the typical economical risks of a self-employed art trader when he constituted and then sold (parts of) his private collection as he might not have initially intended to make such disposals at all. Yet the purpose of VAT being the taxation of consumption, the effective intention of a supplier must be considered to be of secondary importance (principle of generality of VAT).

Since X had used similar means as a professional trader and had systematically proceeded with the sale of a part of his wealth, he was considered to have acted on a professional basis. Thus the transaction was subjected to VAT. It may be assumed that the factual proximity between the private art collection and X’s professional activity as an art gallery owner and his being a recognized expert in that field may have further encouraged the Court in its approach.


The judgment emphasizes a specific tax risk which is frequently neglected in Switzerland. A tax or social security authority in Switzerland is in general not bound by a classification operated by another authority with respect to a certain factual situation. The judgment in question may be particularly striking and may lead to uncertainties concerning the relevant criteria determining what constitutes a self-employed activity in contrast to a dependent activity or even the disposal of privately held assets (all of which have different tax consequences). Similar problems are, however, frequently arising with respect to Swiss withholding taxes and corporate income taxes. While the latter are assessed by the cantonal tax authorities, the former are a matter of the federal tax administration in Switzerland. If for instance the view of the SFTA differs from what the cantonal tax administration states, the taxpayer may encounter substantial tax problems even after a certain transaction. This is especially true if a taxpayer only discusses the possible corporate income tax consequences with the cantonal tax authority without considering a potential impact on withholding taxes (which are a federal matter). The same situation may then lead to seemingly contradictory tax consequences which may not have been anticipated. It is therefore recommendable to ensure that all authorities potentially in charge are consulted before a transaction is carried out.

(Judgement of the Swiss federal court, of 13 April 2012, 2C_399/2012)