Definition of VAT and compulsory tax liability
Value Added Tax (VAT) is an indirect tax levied on the consumption of goods and services. In Switzerland, as in many other countries, businesses are generally required to collect and remit VAT to the state.
The mandatory liability to VAT applies to Swiss companies that in the course of a year exceed a turnover of CHF 100,000 or to companies headquartered abroad and exceeding in their worldwide turnover CHF 100,000 making their first service in Switzerland.
Liability can also be requested voluntarily.
Conditions for VAT Deregistration
The conditions for deregistration must be met in order to be released from VAT liability. Depending on your company's situation, they are as follows:
Turnover thresholds
If a company's decisive turnover no longer meets the required turnover threshold, the company can apply to be removed from the VAT register.
In Switzerland, the minimum turnover threshold required is CHF 100,000 worldwide (or CHF 250,000 for sports associations or institutions).
By global turnover, reference is made to turnover achieved in Switzerland and abroad. Although turnover is exempt.
Cessation of business
One of the conditions for VAT deregistration in Switzerland may be the cessation of business activity for various reasons, such as :
When a business ceases trading, it is no longer liable for VAT and can apply to be removed from the VAT register.
Closure of liquidation proceedings
In the event of the company being wound up, the closure of the winding-up proceedings is also a condition for VAT write-off.
Once the procedure has been completed, the company or entity concerned may be removed from the register of taxable persons.
How to apply for VAT deregistration
Simply meeting the conditions does not automatically mean that you are no longer subject to VAT.
Below is the procedure for unsubscribing from Swiss VAT:
Written request
To initiate the VAT deregistration process, the company concerned must submit a written request to the Federal Tax Administration (FTA).
This written request is an important step in the administrative deregistration process.
Meeting the deadline
Applications for deregistration must be sent to the FTA within 60 days following the end of the tax period concerned.
It is crucial to meet these deadlines to ensure timely deregistration and avoid any penalties or administrative complications.
Failure to meet the deadline could result in another year of VAT liability.
Documents required
Although the documents required may vary, it is likely that adequate documentation will be required to support the request for deregistration.
This may include: annual accounts, proof of cessation of business or closure of winding-up proceedings, proof of payment of all taxes due and other documents that prove the business meets the conditions for VAT deregistration.
Consequences of deregistration
VAT deregistration is not without consequences, as there are tax and administrative implications.
Tax implications
Removal from the VAT register has significant tax implications for a business. Firstly, it is no longer required to collect VAT on sales or deduct VAT on purchases.
However, it is still subject to tax on acquisitions.
End of the right to add the "VAT" extension to documents
Once deregistered, the company is no longer entitled to add the "VAT" extension to its invoices or other commercial documents.
In the event of an oversight, the amounts shown on the invoices as VAT remain payable to the confederation.
Updating internal software
VAT write-offs require accounting adjustments.
The company will have to modify its invoicing and accounting software to ensure that it neither collects nor deducts VAT.
A CORDIP may be necessary
VAT CORDIP is a method used in Switzerland to correct certain VAT calculations.
A CORDIP is often necessary when the entrepreneur makes a change d'affectation of his company's assets, moving from his business assets to his private assets (For example: taking over a company vehicle). He will have to repay part of the VAT he was able to recover at the time of purchase, taking into account depreciation for each year of ownership.
In this case, if you finally cease trading, the goods and other assets on which the business was able to reclaim VAT will have to be repaid if they were held for less than 5 years (20% depreciation per year).
Depreciation on property is 5% per annum.
Conclusion
VAT deregistration in Switzerland is a phase that must be handled with care. Although the aim of this procedure is to lighten the administrative burden, the tax implications can be complicated.
Our team will support you at every stage of your company's life.
