Tax exemption for sports associations

Thereupon, the Swiss Federation of Equestrian Sports filed a complaint with the Administrative Court of the Canton of Berne. The Administrative Court dismissed the complaint by decision of 11 March 2016. The complainant further brought the complaint before the Federal Supreme Court, which dismissed the complaint by decision of 17 July 2017 (2C_314, 315/2016) on the following grounds.

No tax exemption in case of predominantly profit-orientated and self-help purposes

The Federal Supreme Court referred to a ruling of 2010 (2C_383/2010), in which it had already stated that legal entities that primarily pursue profit-making or self-help purposes are in principle not entitled to tax exemption pursuant to Art. 56 lit. g DBG, even if they also serve public purposes. The Federal Supreme Court hereby confirmed this Jurisprudence.

Differentiation regarding the activities of international sports associations

The Swiss Equestrian Federation also argued that the tax exemption is granted to international sports associations due to the pursuit of public purposes and that it should therefore also be entitled to it, as the international aspect is not a relevant distinguishing feature. The Administrative Court and the Federal Supreme Court both base their counter-arguments on the Federal Council's decision of December 5, 2008, which stated that international sport contributes to international understanding and the promotion of peace, in addition to values such as fair play, the fight against racism and discrimination, etc. In addition, Switzerland is an extremely important location for the management of international sports federations, which Switzerland intends to maintain in the future and therefore offer international sports federations attractive framework conditions. Based on this Federal Council decision, the Federal Tax Administration issued a circular ("Tax exemption of international sports federations") on December 12, 2008, in which it determined that international sports federations domiciled in Switzerland and affiliated to the International Olympic Committee are exempt from direct federal tax in accordance with Art. 56 lit. g DBG.

The Federal Supreme Court declared the Federal Council decision and the circular to be in conformity with federal law. It is true that the argument of locational competition would not in itself constitute a sufficient reason for differentiation from national associations. However, the other two aspects mentioned, namely the promotion of peace and international understanding on the one hand and the implementation of values such as fair play, the fight against racism and discrimination, etc. on the other hand, were essential. Although national federations can also commit themselves to the implementation of such values, international sports organisations have to add the aforementioned aspect of peace promotion and international understanding. Both aspects must be given sufficient priority, especially over other economic and self-interests, to justify a tax exemption and the different treatment compared to national associations. Consequently, a different assessment in relation to the pursuit of public purposes may well be appropriate and an equal treatment in injustice does not come into play in casu.

Final remark

The tax exemption for the international sports associations has made Switzerland a centre of the international sports world. The Federal Supreme Court indirectly confirms the existing legal basis for this exemption in Switzerland. The scandal surrounding FIFA puts increasing pressure on this privilege and the present decision shows that understanding within the sports world for this privilege reserved for small circle is dwindling.