Attorney's Fee Indemnification and Input Tax Deduction in VAT Cases

The High Court issued a directive concerning the award of attorney's fee indemnification to a party subject to Value Added Tax (VAT) for proceedings related to their business activities, clarifying that no VAT should be added to the indemnification if the party can fully deduct it as input tax, and only the non-deductible portion should be added otherwise, provided the party asserts and proves this partial deduction inability. The court reasoned that since a fully entitled party suffers no loss from VAT on reimbursed costs, it should not be compensated for it, and this practice, which presumes Swiss legal entities are fully VAT-registered unless otherwise proven, applies even if the party uses the flat-rate method for VAT accounting.