Head Office and Foreign Branch: A Taxable Relationship, and Why Invoicing Now Decides the Outcome

Swiss VAT | Dual-entity principle | Federal Administrative Court, A-2821/2024 (27 October 2025) 

Summary 

• Unlike the EU, Switzerland treats a Swiss head office and its foreign branch as two separate taxable persons (Art. 10 para. 3 MWSTG). Cross-border dealings between them are within the scope of Swiss VAT. 

• Depending on the direction of the flow, an internal recharge is either an exempt-with-credit export (Swiss HO to EU branch) or triggers Swiss acquisition tax (EU branch to Swiss HO), which is a real cost for exempt recipients such as banks and insurers. 

• In A-2821/2024 (27 October 2025), the Federal Administrative Court confirmed the dual-entity principle but held the Swiss head offices to be the recipients because all invoices were addressed to them, resulting in nearly CHF 800,000 in VAT adjustments plus interest. Formalities and evidence are decisive. 

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1. Introduction

The VAT treatment of dealings between a head office and its branch is one of the clearest points of divergence between the Swiss and EU systems. In the European Union, the head office and a branch of the same legal entity form a single taxable person, so internal dealings are normally disregarded (FCE Bank, C-210/04), the exception being VAT grouping (Skandia, C-7/13 and Danske Bank, C-812/19). Switzerland takes the opposite starting point. This article sets out the Swiss statutory basis, the resulting VAT consequences by direction of flow, and the recent Federal Administrative Court decision that makes invoicing and documentation more important than ever. 

2. The statutory basis: Article 10 para. 3 MWSTG

The decisive provision is Article 10 para. 3 of the Swiss VAT Act (MWSTG): the place of business on Swiss territory and all domestic permanent establishments together form a single taxable person. The wording is deliberately limited to Swiss establishments. 

The unavoidable a contrario reading is that a foreign permanent establishment is not consolidated into the Swiss taxable person. Switzerland thereby codifies a dual-entity approach (Zweikreistheorie): the Swiss unit and the foreign unit of the same legal entity are distinct VAT subjects, each with its own registration, scope and input-tax position. See MWSTG Art. 10. 

3. Consequence: an internal recharge is a supply for consideration

Because the two establishments are separate taxable persons, a cross-border recharge or allocation between them is not a mere internal cost movement. It is treated as a supply of services for consideration (Art. 3 and Art. 18 MWSTG). Whether Swiss VAT actually falls due then depends on the place-of-supply rules (Art. 8 MWSTG) and the direction of the transaction. 

3.1. Swiss head office to EU branch (outbound) 

For general B2B services the place of supply is the recipient’s location (Art. 8 para. 1 MWSTG). A service rendered by the Swiss head office to its EU branch therefore has its place of supply abroad and is not subject to Swiss output VAT. It qualifies as an export-type, exempt-with-credit supply: no Swiss VAT is charged, but the Swiss head office retains full input-tax recovery on related costs. The VAT consequences then arise in the EU Member State of the branch, typically via reverse charge in the hands of the branch and subject to that state’s rules. 

3.2. EU branch to Swiss head office (inbound) 

The mirror situation is more sensitive. A service supplied by the foreign establishment to the Swiss head office has its place of supply in Switzerland (recipient location, Art. 8 para. 1 MWSTG). Because the foreign branch is a separate, non-resident supplier, the Swiss head office must self-assess Swiss acquisition tax (Bezugsteuer / reverse charge, Art. 45 MWSTG). This bites economically where the Swiss recipient is not fully entitled to input-tax deduction, for example banks, insurers and other exempt financial activities, precisely the sectors where head-office/branch recharges are largest. 

4. Federal Administrative Court, A-2821/2024 (27 October 2025)

The Swiss Federal Administrative Court recently issued an important decision that serves as a crucial reminder for businesses providing cross-border services to multinational banking groups. 

4.1. The case 

A Swiss business introducer argued that its services to three Swiss banks should not be subject to Swiss VAT because the services were, in substance, provided to the banks’ foreign branches. The Court disagreed. 

4.2. The outcome 

The Court confirmed that, since all invoices were addressed to the Swiss headquarters and not to the foreign branches, the Swiss entities were presumed to be the service recipients. The result was nearly CHF 800,000 in VAT adjustments plus interest. The judgment endorses the dual-entity principle in substance: foreign branches are treated as fiscally distinct entities, but the taxpayer bears a heavy burden of proof to establish the foreign location and identity of the recipient. 

4.3. Key takeaways for businesses 

• Invoice the actual recipient – the invoice recipient is presumed to be the service recipient under Swiss VAT law. 

• Draft clear contracts – avoid ambiguous language about “affiliated entities” that creates doubt about who the real recipient is. 

• Document everything – written proof of where services were performed and for whom plays a “predominant role” in establishing the foreign location. 

• Act prospectively – changes to invoicing practices cannot be applied retroactively to fix past periods. 

5. Comparison with the EU position

Aspect	Switzerland	European Union
Starting principle	HO and foreign branch = separate taxable persons (Art. 10 para. 3 MWSTG)	HO and branch = one taxable person; internal dealings out of scope (FCE Bank, C-210/04)
Cross-border recharge	In scope: export (outbound) or acquisition tax (inbound)	Out of scope, unless a VAT group applies
Role of VAT grouping	Swiss grouping (Art. 13) is domestic only; does not change the cross-border split	Grouping creates taxability of internal dealings (Skandia; Danske Bank)

 Practical takeaways

• Do not assume the EU disregard applies. A Swiss HO to EU branch recharge is a taxable transaction in the Swiss system; treat it as a genuine supply and run the Art. 8 place-of-supply test. 

• Watch inbound recharges into partially or fully exempt Swiss recipients, where the Bezugsteuer creates a real, sticky cost. 

• Get the invoicing and contracts right. Address invoices to the true recipient establishment and keep contemporaneous evidence of where the service is used; A-2821/2024 shows the cost of getting this wrong. 

• Review before period-end. Because corrections cannot be applied retroactively, align invoicing with actual service delivery prospectively and revisit legacy arrangements now. 

7. Sources

Federal Administrative Court, A-2821/2024 (27 October 2025)  |  MWSTG (Swiss VAT Act)  |  FCE Bank, C-210/04  |  Skandia, C-7/13  |  Danske Bank, C-812/19 

 

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VAT on Brokerage Commissions: Services Deemed Provided to Swiss Bank Headquarters, Not Foreign Branches

• VAT applies to brokerage commissions paid to an “apporteur” for 2018–2022.
• Services are considered provided to the Swiss headquarters of the banks, based on invoice address and contract.
• Services are not deemed provided to foreign branches.
• VAT is therefore payable.
• The appeal was dismissed.

Source: bvger.weblaw.ch

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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