Tax exemption and public service

The taxpayer benefits from a total tax exemption due to its public service activity (waste treatment). The company cannot pay dividends and its liquidation surplus is, if applicable, allocated to other public service purposes. The taxpayer is expanding its activities into district heating.

The tax authorities consider that the district heating activity cannot be classified as a public service and taxes this activity.

Federal judges recall the notion of public service
interpreted restrictively
Completion of tasks closely related to state tasks
content of the statutes is not decisive.
the concept of public service is not immutable, it varies according to the evolution of ideas and needs.
examples: the provision by fixed infrastructure of water or energy, or the disposal of urban waste, BUT NOT services in sectors such as the supply of district heating, or telecommunications, or electricity generation
(see 6.1.)

Federal judges pursue
Performing a task that is of public interest is not sufficient to conclude that it pursues a public service aim.
No tax exemption if the legal entity primarily pursues profit-making goals, even if these simultaneously serve objectives of public interest.
▶️ Profit-making activity = engagement of factors of production (labour and capital) in a real situation of competition or economic monopoly to obtain a profit and, for its services, remuneration analogous to that ordinarily paid in economic life.
Tax exemption possible if the legal person has been entrusted with a public service task by an act of public law
Legal entity subject to certain supervision by the public community and whose own funds are irrevocably and exclusively allocated by its statutes to these public service purposes
▶️ no exemption if profit-making or mutual assistance objectives are predominant over the main public service objective
partial exemption requires clear accounting separation between the income and funds for which exemption is requested and others

▶️ Partial exemption excluded where the legal entity pursues profit-making or mutual assistance aims that exceed a certain measure
respect the principle of competitive neutrality between legal entities in comparable competitive situations
(cons. 6.2.)

The case is in French. It is a Valaisan case.

TF, judgment 9C_205/2025, of 26 March 2026