Appearances can be deceptive: when several professionals work together, who pays the VAT?

Nowadays, it is increasingly common to see: 

• Therapists sharing the same practice 
• Freelancers working in a hair salon 
• Beauticians working together in a centre
• Or two people joining forces for a joint project. 

These forms of collaboration are modern, flexible and practical. Yet they carry a tax risk that is often underestimated: in the event of an audit, the Federal Tax Administration (FTA) may treat a single person or entity as the actual provider of the services making them solely liable for VAT, even on services that they do not perform themselves. 

Numerous cases have been brought before the courts in recent years, leading to a change in the FTA's practice. The consequences can be severe, including VAT adjustments covering several years, interest and sometimes penalties. 

1. Who is considered to be the supplier of the service? 

The central question asked by the FTA is simple: from the customer's point of view, who is providing the service? 

According to the law, the service is deemed to be provided by the person who appears to third parties as the supplier. There is an exception in the case of representation (mandate), but this is only permitted if: 

• The existence of the mandate is clearly proven and 
• The representation is visible and known to the customer. 

If these conditions are not clearly met and demonstrable, the FTA will attribute the service to the person who appears externally as the service provider, even if the internal organisation is different. The risk is that a person or organisation may find themselves liable for VAT on all services, without having anticipated this and sometimes without having received the corresponding amounts. Recent decisions show that the criterion of visibility has become decisive, sometimes even outweighing contractual or social realities. 

Case study: the pharmacy and the therapists 

In a case heard by the Federal Court (ATF 2C_727/2021), a pharmacy provided rooms for independent therapists. Several spaces in the same building as the pharmacy were therefore used for medical treatments and other services. The pharmacy had entered into rental agreements with various therapists for these rooms. 

Internally, the therapists were completely independent: 

• They were recognised as self-employed by the AVS (Swiss Federal Insurance Institution) 
• They kept their own accounts 
• They invoiced and collected their fees themselves 
• They bore the risk of non-payment 
• There was no formal relationship of subordination with the pharmacy. 

The FTA's decision 

Despite this apparent independence, following a VAT audit, the FTA ruled that the therapists' turnover should be attributed to the pharmacy. It considered that these services were taxable, as only medical services provided by a doctor with a cantonal licence are exempt from VAT. 

From the FTA's point of view: 

• The pharmacy promoted the therapists on its website ("our therapists") 
• Appointments were made through the pharmacy  
• there was no clear indication that they were separate entities. 

Confirmation by the Federal Court 

The Federal Court confirmed this analysis: for the average customer, the pharmacy appeared to be the provider of the services. Consequently, the pharmacy is liable for VAT on all services provided by the therapists.  

This ruling clearly illustrates that, for VAT purposes, customer perception takes precedence over internal organisational arrangements.  

2. The often overlooked risk: the simple partnership 

In some cases, these collaborations can also lead, sometimes unintentionally, to the creation of a simple partnership. 

A simple partnership exists when: 

• At least two people join forces for a common purpose 
• Without any requirement for a written agreement or registration in the commercial register. 

Even without knowing it, professionals may therefore find themselves bound by a simple partnership. From a VAT perspective, the legal form is not decisive. Thus, in certain cases, a simple partnership may be liable for VAT if its taxable turnover exceeds the threshold of CHF 100,000. 

Once again, what matters is the image presented to the outside world: if the group appears to be an economic unit, the FTA may treat it as a single entity. 

3. Identifying risks to better anticipate them 

These situations are not isolated. The same issues may arise, for example: 

• In a hairdressing salon that also offers beauty, nail or massage services 
• In wellness centres 
• In fitness centres offering room hire to independent practitioners and therapists. 

To avoid unexpected surprises, the internal organisation must be consistent with it’s external appearance.  

If in doubt, ask yourself the following questions: 

• From a third party's perspective, who appears to be the service provider? 
• If the customer has any questions or is dissatisfied, who do they turn to? 

When the situation is unclear or ambiguous, there is a real risk that the FTA will attribute all services to a single person or structure, with significant financial consequences. 

When it comes to VAT, appearances are not a minor detail: they are often the deciding factor. 
 
Authors: Marie Huonder and Vanessa Cilio