SFTA confirmed that COVID loans granted by banks (at 0% interest) and guaranteed by the Confederation constitute a subsidy for the banks, requiring them to correct their input VAT deduction (if they are VAT registered). However, the SFTA also confirmed that the difference between the 0% interest rate and the market rate should not be treated as a subsidy in the borrowers’ hands because the Confederation has no involvement there such that borrowers are not required to correct their input VAT.
Source Deloitte
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