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Swiss VAT: the essentials

Find out everything you should know about Swiss VAT.

Table of contents

What is VAT?

In this article we will discuss the basics and particularities of Swiss VAT.

VAT (value added tax) is an indirect tax on consumption. In principle, it concerns all goods and services consumed or used in Switzerland.

It is the final consumer who bears the VAT. However, it is up to the companies to ensure the collection of this tax and to pay it to the Federal Tax Administration.

Some activities are excluded from the scope of VAT, mainly medical, educational, cultural, insurance, financial and residential rental activities. For more details see Art.21 al.2 LTVA.

Depending on the amount of turnover achieved, a company may or may not be exempted from VAT liability. Different methods are available to the company, including the effective method or the net tax liability method (NTR).

Swiss VAT liability

Once subject to VAT, all sales and services of a company will be subject to VAT. M

VAT is calculated on the amount excluding VAT of the services. The company's invoices will have to comply with the conditions laid down by Art. 26 LTVA as regards the form and information contained therein.

The form requirements for an invoice are as follows :

  • Full contact details of the supplier and its VAT number
  • Client's contact information (Name, address)
  • Invoice date or date of performance if not identical
  • Description of the service, type, purpose and volume of the service
  • The amount billed
  • The rate applied to the benefit (amount is not enough, you have to put the rate in

Compulsory liability

Anyone who runs a business, even a non-profit one, and regardless of the legal form, is in principle liable to pay VAT in Switzerland.

It should be noted that the tax liability is not compulsory for companies that generate less than CHF 100'000/year from taxable services in Switzerland.

In order to determine the CHF 100,000, the worldwide revenues of the company must be included in the calculation, as they are decisive for the tax liability. This can be for example :

+All deliveries of goods and services taxable on Swiss territory
+All deliveries of goods and services exempt according to Art.23 LTVA
Benefits excluded from the scope of the tax according to Art.21 al.2 VAT.
=Amount determining the VAT liability

 

Voluntary VAT liability

Art.11 LTVA provides that any person/company carrying out an entrepreneurial activity may voluntarily register for Swiss VAT.

  • No minimum threshold (turnover)
  • For a minimum duration of at least one fiscal period
  • Voluntary liability is possible during the year

Opting for services excluded from VAT

Art.22 al.1 LTVA provides for a voluntary VAT liability for persons exercising an activity excluded from the scope of taxation according to Art. 21 LTVA.

However, the option is not available for the activities of :

  • Insurance field
  • Domaine financier
  • Gambling area
  • Real estate if the object is used or intended to be used exclusively for residential purposes

Start of VAT liability

Company with its headquarters, domicile or permanent establishment on Swiss territoryAt the beginning of the entrepreneurial activity
All other companiesWhen they provide a service on Swiss territory for the first time

Example 1 :

01.01.2022Company TT SA has just been created
31.12.2022Does not exceed the CHF 100,000 threshold in the first year
31.12.2023During the year 2023 the 100'000 CHF mark is exceeded
01.01.2024Company TT SA will be subject to VAT from 01.01.2024

Example 2 :

01.01.2022Company TT SA has just been created
31.03.2022It generates more than CHF 25,000 in taxable benefits
01.04.2022She decides to be subject to the law from the 1st day of the 4th month
01.04.2022She is careful and modifies her invoices in order to charge VAT

It is important for a Swiss company to evaluate its turnover after 3 months of activity. If the turnover exceeds 25'000 CHF the company has the choice between :

  • Be liable for VAT from the first day of its activity. It can recover the VAT paid during this period, but must also pay VAT on its taxable turnover in Switzerland generated during the first three months of its activity.
  • Start its tax liability after the 1st day of the 4th month. In this way, the company avoids paying VAT on its sales for which it could not claim a deduction, but cannot reclaim VAT on purchases and investments made in the first three months.

End of VAT liability

Company with its headquarters, domicile or permanent establishment on Swiss territoryon the cessation of the entrepreneurial activity
In case of liquidationon closure of the liquidation proceedings
All other companiesat the end of the calendar year in which they last provided services in Switzerland

If the taxpayer's turnover no longer reaches the decisive amount of CHF 100,000 and there is reason to assume that the decisive turnover will not be reached in the next tax period either, the taxpayer must report this. This can be done at the earliest by the end of the tax period in which the decisive amount is likely to be reached. The waiver will take effect from the next tax period. If he does not do so, he is deemed to have voluntarily opted to remain a taxable person.

It is necessary to be aware that in case of termination of the VAT liability, a retroactive calculation for all the purchases/investments on which the VAT has been recovered will have to be made. This is due to the fact that these objects will go from being used for business purposes to being used for private purposes, so a correction of the deduction of the Advance Tax (CORDIP) will have to be made.

VAT rates in Switzerland

The VAT rates in Switzerland are as follows :

7.7% Standard rateArt.25 al.1 LTVA

This is the rate that is generally used in the provision of services and the sale of goods.

For example, is subject to the rate of 7.7%: Tax advice, Provision of painting, Meals taken on site, Any sale of goods or services not subject to the rate of 2.5% or 3.7%.

2.5% Reduced rateArt.25 al.2 & al.3 LTVA

This rate applies in cases explicitly covered by the law, including :

  • Foodstuffs (except alcoholic beverages)
  • Medicines - Art.49 OTVA
  • Newspapers and magazines without advertising character - Art.50 OTVA
 
 
3.7% Special rateArt.25 al.4 LTVA

This rate is for the accommodation sector. The accommodation sector is understood to be the accommodation with breakfast, even if it is charged separately.

New VAT rates from 01.01.2024

Following the vote of 25.09.2022 concerning the additional financing of the AHV through an increase in VAT, the Swiss people have accepted the proposal of the Federal Council.

Therefore, the VAT rates known to date will be increased from 01.01.2024

Taux de TVA
avant augmentation
IncreaseAfter increase
Standard rate: 7.7+ 0.4%8.1%
Reduced rate: 2.5+ 0.1%2.6%
Special rate: 3.7%.+ 0.1%3.8%

How to register for Swiss VAT?

The VAT registration is done on the official website of the Federal Tax Administration. For your registration it is necessary to bring the following documents:
 
  • Extract from the Trade Register and your IDE number
  • For simple companies not registered in the commercial register, your social insurance number
  • First year sales or sales prospects
  • Tax representative for foreign companies

 

Once the various forms have been filled out and sent in, you may receive a call from the AFC before you are subject to VAT.

You will then receive confirmation of your registration and your first VAT deduction code directly at home.

Where can I find the VAT number of another company?

Are you looking for a company's VAT number to find out whether it is subject to VAT or not? You can visit the Confederation's official website at IDE register.

Just type the company name in the search bar, click on the company name, go to the bottom of the page to "VAT data" and see if the company has a VAT number.

The VAT number is the company's CHE number with VAT at the end.

Example : CHE-000.000.000 VAT

Completing a VAT statement

As a VAT payer, you are obliged to submit a detailed statement of the services provided every quarter or half-year. You can choose between two methods.

As a rule, the settlement is made according to the actual method.

The Swiss VAT statement can be filed directly online.

Effective method

This method allows you to recover the VAT paid on your expenses and investments from the tax you have to pay on the services provided.

This statement must be made quarterly.

Example calculation :

CHF 10'000 (excl. VAT) of taxable sales and CHF 5'000 (excl. VAT) of purchases with deductible VAT from 01.01.2022 to 31.03.2022

770 CHF with VAT due

385 CHF for Deductible VAT

385 CHF to the Federal Tax Administration

Remarks :

The tax on acquisitions has no impact with the effective method.

Import tax paid at customs is also recoverable.

Method Net tax debt rate

This method does not allow you to recover VAT. But it is relatively simple to apply. You just have to take your turnover and multiply it by the rate assigned to you by the AFC according to your activity. (see rate list)

This count must be performed semi-annually.


Example :

Cleaning company, applied rate of 5.9 %
Turnover: 80'000 CHF (incl. VAT) of taxable sales from 01.01.2022 to 30.06.2022

80'000 CHF * 5.9% = 4'720 CHF of VAT due to the Federal Tax Administration

To benefit from this method two conditions apply:

  • Annual turnover does not exceed CHF 5'005'000
  • VAT amount calculated with the net tax liability rate does not exceed CHF 103'000

 

Remarks :

You can use a maximum of 2 rates. For example for a restaurant that sells take-away and on-site services or a garage that does mechanics and bodywork.

Acquisition tax is due at the normal rate, if you use services from abroad you will have to pay tax on this service.

The tax on imports is not recoverable either.

VAT payment and deadlines

You have 60 days after the statement period date to submit your VAT statement and pay the VAT due using the QR-invoice located on the second page of the summary sheet.

Once the deadline has passed, interest on arrears is due on the amount of VAT due.

It is possible to request a delay for the submission of the statement of account. This avoids a request for a provisional advance payment and possible summonses, but not the accounting of default interest.

This principle also applies to the AFC, which is obliged to reimburse you within 60 days after the submission of your VAT statement, failing which it owes you default interest from the 61st day.

Advantages of registering for VAT

  • Recovery of VAT on your investments and expenses
  • Gain credibility with professional clients

Disadvantages of registering for VAT

  • Rate increase (at least for private companies that do not recover it)
  • Increased administrative burden
  • VAT issues (exempt or not; end of tax liability; CORDIP; REDIP; PASM)

Acquisition tax: what is it?

The acquisition tax puts Swiss and foreign companies on an equal footing.


For the actual counting method :

The acquisition tax must be reported under number 381 of the VAT statement as tax due and the input tax can be reclaimed. The transaction is therefore not relevant.


The Net Tax Debt Rate Settlement Method :

The acquisition tax must be declared under number 381 of the VAT statement as tax due and the input tax cannot be reclaimed. The transaction ends with the obligation to pay VAT at the rate that would be applied to the same service in Switzerland.


Companies not subject to VAT:

The acquisition tax is indeed due if you exceed the annual deductible of CHF 10'000 for services from abroad. Once the threshold has been exceeded, the taxpayer must declare the amount to the FTA within 60 days after the end of the calendar year.


Examples of services, subject to acquisition tax:

  • Consulting services from abroad (e.g. legal, tax advice, etc.)
  • Services from abroad (e.g. visual creations, website, etc.)
  • Advertising services from abroad (e.g. Google, Facebook, etc.)

Services that are excluded from taxation under Art. 21 VAT Act or exempted from taxation under Art. 23 VAT Act are not subject to acquisition tax.

 

Import tax: how does it work ?

When importing goods into Switzerland by a Swiss company, the importer must pay VAT.

The VAT on imports is levied by the Federal Customs Administration (FCA). This measure is mainly aimed at not disadvantaging Swiss companies that make their purchases in Switzerland and therefore pay VAT from those who import goods from abroad.

The VAT rate applied upon importation is the same as it would be if the good was purchased in Switzerland. It can be normal or reduced for food products, medicines, etc.

The calculation of the VAT, is based on the invoice price by the supplier of the goods to which are added the costs to the place of destination in Switzerland. The foreign VAT is not taken into account in this calculation as long as it is clearly indicated on the invoice or in the sales contract.

A proof must of course be given to the customs office at the time of importation (e.g.: invoice, sales contract, etc.).

The importation of certain goods is tax free see Art.53 LTVA.


For the actual counting method :

Import taxes can be recovered.

Condition: The importer is in possession of the VAT tax ruling from the Federal Customs Administration, issued in the importer's name and address.


The Net Tax Debt Rate Settlement Method :

The import tax cannot be recovered for the taxpayer deducting the VAT according to the net tax liability rate the import tax remains an expense.


For companies not subject to VAT:

For those not subject to VAT, the import tax remains a burden.

For those not subject to VAT, the import tax remains a burden.

It is important to make the right choices at the beginning of the entrepreneurial activity, especially with regard to :

  • VAT liability
  • benefits agreed or received ;
  • effective settlement methods or net tax liability rate.

These decisions will have a direct impact on your business. Being supported from the outset by a specialist will help you avoid making mistakes. Don't hesitate to get in touch with Tax Services.

In addition, depending on the activity you carry out and the current state of your business, various VAT-related issues will come into play. The respect of the VAT rules will save you from penalties in case of control.