VAT, GST and Sales Tax in Switzerland

Summary

Name of the tax Value-added tax (VAT)
Local names Mehrwertsteuer (MWST) Taxe sur la valeur ajoutée (TVA) Imposta sul valore aggiunto (IVA)
Date introduced 1-Jan-95
Trading bloc membership European Free Trade Association (EFTA)
Administered by Federal Tax Administration (https://www.estv.admin.ch/ estv/en/home.html)
VAT rates
Standard 8%
Reduced and special 2.5% and 3.8%
Other Zero-rated and exempt
VAT number format CHE-123.456.789 MWST
VAT return periods Quarterly, Half-yearly (if the taxable person has applied to use the net tax rate method), Monthly (optional if excess of input over output VAT occurs regularly)
Thresholds
Registration CHF100,000 (however, voluntary registration is possible)
Recovery of VAT by non-established businesses  Yes (with the observance of the reciprocity rule)

Scope of the tax

VAT applies to the following transactions:

  • The supply of goods or services made in Switzerland for con­sideration by a taxable person.
  • The receipt of reverse-charge services or, in some cases, goods by any person in Switzerland who purchases the items from an entity that is established outside Switzerland and that is not registered for VAT in Switzerland (services and goods for which the recipient is liable for the VAT due). Services and goods purchased by nontaxable persons are not subject to the reverse charge if the amount due to the foreign supplier does not exceed CHF10,000 per calendar year.
  • The importation of goods from outside Switzerland and Liechtenstein, regardless of the status of the importer.

Liechtenstein is considered to be the domestic territory for Swiss VAT purposes. Likewise, Switzerland is considered to be part of the territory of Liechtenstein for the purposes of VAT in Liechtenstein.

Who is liable

A taxable person is any person who, regardless of the legal form, purpose or result, carries out a business in Switzerland. Carrying out the business involves the independent exercising of profes­sional or commercial activities together with the intention to execute regular transactions and acting externally in one’s name.

Group registration. Legal entities with their seat in Switzerland or commercial units in Switzerland can form a VAT group if they are related as a result of “joint supervision.” The group may include Swiss branches of foreign entities, to the extent that the foreign entities are under the same “joint supervision” as the other VAT group members. Although Liechtenstein is considered to be domestic territory for Swiss VAT purposes (and vice versa), it is not possible to form a VAT group that includes both Swiss and Liechtenstein entities.

The tax group must appoint a tax representative who will deal with the VAT-related proceedings of the group. The minimum period for which the tax group can exist is one year.

VAT group members are treated as a single taxable person with a single VAT number.

The following are the significant aspects of grouping:

  • The VAT group submits a single, consolidated VAT return for all of its members.
  • VAT is not chargeable on transactions between group members.
  • All VAT group members are jointly and severally liable for the group’s VAT liabilities.

Non-established businesses. A “non-established business” is a business that does not have a legal seat or fixed establishment in the territory of Switzerland. A non-established business that makes supplies of goods or services in Switzerland must register for VAT if it is liable to account for Swiss VAT on the supplies.

From 1 January 2018:

  • The current CHF100,000 VAT registration threshold will be removed. A foreign business making any local supply of goods or services in Switzerland (e.g., a foreign supplier of B2C digi­tal services) will become liable for Swiss VAT if its worldwide turnover exceeds the CHF100,000 threshold.
  • Foreign businesses selling goods ordered online to Swiss cus­tomers (final consumers) will become liable for Swiss VAT if their sales/deliveries to Swiss customers exceed CHF100,000 in a year.

Tax representatives. A non-established business (see Non-established businesses) must appoint a tax representative if it supplies goods or services subject to Swiss VAT.

Reverse charge. The “reverse charge” is a form of self-assessment for VAT through which the recipient accounts for the tax. The reverse-charge mechanism applies to the following situations:

  • A Swiss recipient receives services from a supplier domiciled abroad who is not registered for Swiss VAT, and the place of supply is in Switzerland.
  • Data carriers without market value are imported into Switzerland, and certain services and rights are associated with these data carriers.
  • A supply of goods is made in Switzerland by a business that is established abroad and that is not registered for Swiss VAT, and the supply is not subject to import VAT.

In this context, it should be noted that Swiss VAT regulations follow a rather broad definition of “supplies of goods” (including e.g., sale of energy (gas, oil, electricity), lease agreements, work performed on goods, even if the good is not altered by the work but only tested, calibrated, regulated, checked for its function,etc.). Such suppliers domiciled abroad which are (obliged to be) VAT registered in Switzerland must account for the Swiss VAT related to taxable supplies performed in Switzerland.

A Swiss recipient is liable for the settlement of VAT under the reverse-charge mechanism if the recipient is a taxable person or if the value of the supplies received exceeds CHF10,000 per calendar year.

The place of supply for most supplies of services is the custom­er’s country (fallback rule). In the circumstances described above, the customer must account for VAT under the reverse-charge procedure. However, some exceptions exist. These exceptions, for which additional consideration regarding the place-of-supply rules needs to be made, include the following:

  • Services that require the physical presence of the customer, who is a natural person, at the place where these services are provided (for example, beauty or curative therapies and treat­ments, family advisory and child care), even if exceptionally supplied from a distance
  • Services of travel agents and event organizers
  • Services in the fields of culture, art, sport, science, education or entertainment, and similar services including the activities of organizers and related activities
  • Restaurant services
  • Passenger transport services
  • Services related to immovable property (for example, interme­diation, administration, valuation, services in connection with the preparation and coordination of construction works such as architectural, engineering and supervising services and land and building monitoring, and accommodation services)
  • Services in the field of international development and humani­tarian aid

The rule providing that the place of supply is the domicile of the recipient applies to supplies of electricity power or natural gaso­line in pipes, even though those supplies are treated as supplies of goods and not services.

The reverse-charge mechanism applies to electronic services, supplies of electricity power or natural gasoline in pipes and telecommunication services only if the Swiss service recipient is a VAT-registered business. Consequently, foreign businesses that provide electronic supplies of services to persons who are not registered for VAT must register for VAT in Switzerland and charge Swiss VAT if their turnover in Switzerland exceeds the annual threshold of CHF100,000. For all other services, the reverse-charge mechanism applies regardless of whether the recipient of the services is registered for VAT.

Registration procedures. Businesses that intend to register for Swiss VAT need to file an application with the Swiss Federal Tax Authorities. The application must be filed electronically via the Swiss Federal Tax Authorities’ webpage, available in German, French and Italian at https://www.estv.admin.ch/estv/de/home/ mehrwertsteuer/dienstleistungen/formulare-online/anmeldung­bei-der-mwst.html. On average, the application procedure takes about two weeks.

Late-registration penalties. Taxable persons should be registered with the Federal Tax Administration in writing within 30 days after the commencement of their tax liability or 60 days for per­sons who become taxable solely because of the acquisition tax. A penalty may be levied for late VAT registration. In the case of tax evasion, fines of up to CHF800,000 may be charged. The amount of the fine varies depending on the circumstances.

Digital economy. Foreign businesses that provide electronic sup­plies of services to persons who are not registered for VAT must register for VAT in Switzerland and charge Swiss VAT if their turnover in Switzerland exceeds the annual threshold of CHF100,000. For electronically supplied services to recipients registered for Swiss VAT, the reverse charge mechanism applies provided that the supplier is established outside of Switzerland and not registered for Swiss VAT.

For changes related to the digital economy that will apply from 1 January 2018, see Non-established businesses above.

Deregistration. Taxable persons are required to notify the Swiss Federal Tax Authorities in writing within 30 days after ceasing their entrepreneurial activities in Switzerland or with concluding the liquidation procedure at the latest.

VAT rates

The term “taxable supplies” refers to supplies of goods and ser­vices that are liable to VAT at any rate.

The VAT rates are:

  • Standard rate: 8%
  • Reduced rate: 2.5%
  • Special rate of 3.8% (for hotel accommodation)

The standard VAT rate applies to all supplies of goods or servic­es, unless a specific measure provides for a reduced rate or an exemption.

Examples of goods and services taxable at 2.5%

  • Books, newspapers and magazines (from 1 January 2018: also e-books, e-newspapers and e-magazines)
  • Food and drinks (except provided by hotels and restaurants)
  • Drugs
  • Water in pipes

Examples of goods and services taxable at 3.8%

  • Hotel accommodation, including breakfast

The term “tax-exempt without credit” refers to supplies of goods and services that are not liable to tax and that do not give rise to a right of input tax deduction (see Section F). Some supplies are classified as tax exempt with credit (zero-rated), which means that no VAT is chargeable, but the supplier may recover the related input tax.

Examples of tax-exempt without credit supplies

  • Health care (in some cases; unless opted for taxation)
  • Financial transactions
  • Insurance
  • Education (unless opted for taxation)
  • Real estate (unless opted for taxation)

Examples of tax-exempt with credit supplies

  • Exports of goods and services
  • Supplies of certain goods and services to airlines
  • Services with the place of supply abroad
  • Supplies of investment gold (effective 1 January 2014, the scope of the term “investment gold” has been broadened and is not limited to specific forms of investment gold)

Option to tax for exempt supplies. Certain supplies of goods and services may be voluntarily subjected to tax by openly charging VAT on the invoice (option), e.g., certain health care, educational and cultural services as well as renting or leasing of immovable property. However, restrictions may apply and the right to opt should be reviewed on a by-case basis.

Time of supply

The time when VAT becomes due is called the “time of supply” or the “tax point.” In Switzerland, taxable turnover must be declared for the VAT quarter (or VAT month, if monthly declara­tions are filed) in which the sales invoice for a supply is issued or in which payment is received (if no invoice is issued). If the declaration is made on a cash basis, the turnover must be declared for the quarter in which payment is collected.

Prepayments. The tax point for a prepayment is when the sup­plier receives the consideration or when the invoice is issued, whichever is earlier.

Reverse charge. The tax point for reverse-charge services for a taxable person is when the invoice is received or when the service fee is paid. In all other situations, including declarations made on a cash basis, the effective payment date is decisive.

Imported goods. The time of supply for imported goods is the official date of importation.

Recovery of VAT by taxable persons

A taxable person may recover input tax, which is VAT on pur­chases, to the extent that the purchases of goods and services are related to taxable supplies, including tax-exempt supplies with credit and supplies rendered outside Switzerland or Liechtenstein that would be taxable if rendered domestically. A taxable person generally recovers input tax by deducting it from output tax, which is VAT charged on supplies made.

Input tax includes VAT charged on goods and services supplied in Switzerland and Liechtenstein, VAT paid on imports of goods and VAT self-assessed on reverse-charge supplies.

According to a recommendation of the Swiss VAT authorities, a valid tax invoice or customs document and proof that the input VAT was paid should support a claim for input tax.

Effective from 1 January 2010, new rules allow the tax authori­ties to accept all means of proof.

Nondeductible input tax. Input tax may not be recovered on pur­chases of goods and services that are not used for taxable busi­ness purposes (for example, goods acquired for private use by an entrepreneur).

Examples of items for which input tax is nondeductible

  • Private expenditure

Examples of items for which input tax is deductible
(if related to a taxable business use)

  • Purchase, hire, lease, maintenance and fuel for cars, vans and trucks (output tax is due on the private use of company cars)
  • Parking
  • Conferences, seminars and training courses
  • Books
  • Business use of home telephone (output tax is due on the pri­vate element)
  • Advertising
  • Transport
  • Hotel accommodation
  • Business gifts (subject to restrictions; output tax may be due)

Partial exemption. Input tax directly related to making tax-exempt supplies without credit is generally not recoverable. If a Swiss taxable person makes both tax-exempt supplies without credit and taxable supplies, it may not recover input tax in full. This situation is referred to as “partial exemption.”

The amount of input tax that a partially exempt business can recover may be calculated using the following two-stage calcula­tion:

  • The first stage identifies the input VAT that can be directly allocated to taxable or to tax-exempt supplies without credit. Input tax directly allocated to taxable supplies is deductible, while input tax directly related to tax-exempt supplies without credit is not deductible. Tax-exempt supplies with credit are treated as taxable supplies for these purposes.
  • The next stage identifies the amount of the remaining input tax (for example, input tax on general business overhead) that may be partly allocated to taxable supplies and accordingly only partly recovered. The calculation may be performed using a general pro rata method based on the values of taxable supplies made versus tax-exempt supplies without credit, or it may be performed using another appropriate method.

Refunds. If the amount of input VAT recoverable in a period exceeds the amount of output VAT payable in the same period, the taxable person is entitled to a refund of the excess amount. A VAT repayment is paid automatically within 60 days after the return is received by the Swiss VAT authorities.

Preregistration costs. Not applicable.

Recovery of VAT by non-established businesses

Switzerland refunds VAT incurred by businesses that are neither established nor registered for VAT in Switzerland or Liechtenstein and that have not made any supplies in Switzerland or Liechtenstein. Non-established businesses may generally claim Swiss VAT to the same extent as Swiss VAT-registered businesses. However, restric tions apply to certain types of expenditure for claimants established in certain countries.

Australia                          Greece                          Norway

Austria                            Hong Kong                  Poland

Bahrain                            Hungary                       Portugal

Belgium                           Ireland                          Romania

Bermuda                          Israel                            Saudi Arabia

Bulgaria                           Italy                              Serbia

Canada                            Japan                            Slovak Republic

Croatia                             Latvia                           Slovenia

Cyprus                            Lithuania                      Spain

Czech Republic               Luxembourg                Sweden

Denmark                         Macedonia                   Taiwan

Estonia                            Malta                            Turkey

Finland                            Monaco                        United Kingdom

France                             Netherlands                  United States

Germany

Refund application. The deadline for refund claims is 30 June fol­lowing the calendar year in which the supply received was invoiced. This deadline is strictly enforced.

Claims may be submitted in French, German or Italian. The claim­ant must appoint a representative who is a natural person or a legal entity whose domicile or registered office is in Switzerland.

The claim period is one year. The minimum claim amount is CHF500.

The following documentation must accompany the claim (the forms indicated below are available for download at the website of the Swiss VAT authorities):

  • Completed VAT refund claim (Forms 1222 and 1223). Form 1222 identifies the Swiss tax representative that needs to be appointed to apply for the refund.
  • Original VAT invoices.
  • Proof of payment (if requested by the Swiss tax authorities).
  • A Certificate of Taxable Status for the claimant, which is issued by the competent tax authorities in the country where the claim­ant is established, to prove the business status of the claimant.

Applications for refunds of Swiss VAT may be sent to the follow­ing address:

Eidgenoessische Steuerverwaltung Hauptabteilung Mehrwertsteuer Schwarztorstrasse 50

CH-3003 Bern

Switzerland

Repayment interest. Refunds are generally made within six months after the date of application. However, the Swiss VAT authorities pay interest on refunds made after this period if reci­procity rules are observed.

Invoicing

VAT invoices and corrections. A Swiss taxable person must gener­ally provide a VAT invoice for all taxable supplies made, includ­ing exports. A VAT invoice is necessary to support a refund under the VAT refund scheme for non-established businesses.

A VAT credit or debit note may be used to correct the VAT charged and reclaimed on a supply of goods or services. These documents must be cross-referenced to the original VAT invoice.

Proof of exports. Swiss VAT is not chargeable on supplies of exported goods. However, to qualify as VAT-free, export supplies must be supported by evidence that the goods have left Switzerland. Acceptable proof includes the officially validated customs documentation.

Foreign-currency invoices. If a Swiss VAT invoice is issued in a currency other than Swiss francs (CHF), the amounts must be con verted to Swiss francs, using the appropriate exchange rates published by the Federal Tax Administration, which are available on its website (monthly or daily rates are available). If no clear tax advantage is gained, the use of a group exchange rate may be allowed.

Electronic invoicing. Electronic invoicing is permitted. However, data and information transmitted and stored electronically that are relevant for claiming input tax, or levying or collecting tax, have to meet the following requirements in order to be of the same evidential value as data and information readable without auxiliary means:

  • Proof of origin
  • Proof of integrity
  • Dispatch not contested

These requirements can be met by applying an advanced elec­tronic signature.

VAT returns and payment

VAT returns. Swiss VAT returns are usually submitted for quar­terly periods. If the taxable person has applied to be taxed under the net tax rate method (that is, the tax due is calculated by mul­tiplying the gross total taxable turnover by the balance tax rate authorized by the Swiss tax authorities), VAT returns must be submitted on a half-yearly basis. Taxable persons with a regular excess of input over output VAT may apply to submit monthly returns. The VAT return is due, together with full payment, 60 days after the end of the VAT settlement period.

VAT liabilities must be paid in Swiss francs.

Special schemes. Two special schemes involve calculating VAT due in a different manner.

Net tax rate scheme. If a taxable person does not generate more than CHF5.020 million turnover from taxable supplies annually and in the same period does not have to pay more than CHF109,000 in VAT, calculated at the net tax rate that applies to him, he may report VAT under the net tax rate method. When using the net tax rate method, the VAT due is determined by mul­tiplying the total of the taxable considerations, including tax, generated in the reporting period in Switzerland by the net tax rate approved by the Swiss Federal Tax Authorities. The net tax rates take into account the input tax amounts usual in the relevant branch of the industry. They are fixed by the Swiss Federal Tax

Authorities after consultation with the industry association con­cerned. Authorization to report under the net tax rate method must be requested from the Swiss Federal Tax Authorities and the method must be used for at least one tax period.

Flat tax rate scheme. In principle, the flat tax rate method is similar to the net tax rate method, but may be applied only by public authorities and related institutions, in particular private hospitals and schools or licensed transport undertakings and associations and foundations.

Electronic filing and archiving. Taxable persons can choose to file VAT returns electronically. A one-time registration is necessary (https://www.estv.admin.ch/estv/de/home/mehrwertsteuer/dien­stleistungen/mwst-abrechnung-online.html). However, filing electronically does not prevent a non-established business from appointing a tax representative (see Non-established businesses).

Data and information that are relevant for claiming input tax, or levying or collecting tax can be transmitted and archived elec­tronically or in a similar manner. They have the same evidential value as data and information that are readable without auxiliary means, provided the following requirements are met:

  • Proof of origin
  • Proof of integrity
  • Dispatch not contested

Special legal provisions that require the transmission or storage of the data and information mentioned in a particular form are in place.

Annual returns. There is no requirement to file an additional annual return in Switzerland. However, if the taxable person discovers errors in his tax returns in the course of drawing up his annual accounts, he must correct them at the latest in the return for the reporting period in which the 180th day after the end of the relevant business year falls.

Penalties

Interest at a rate of 4% a year may be assessed for the late pay­ment of VAT. Penalties may be also assessed for the late submis­sion of a VAT return.

Any person who willfully or negligently reduces the tax claim to the detriment of the state by not declaring in a tax period all receipts; declaring receipts from supplies exempt from the tax that are too high; not declaring all supplies subject to reverse charge; declaring expenses entitling to an input tax deduction that are too high; obtaining an incorrect refund; or obtaining an unjustified tax abatement can be liable for a fine of up to CHF800,000. If the tax advantage obtained by the act is greater than the threatened penalty and the offense was committed will­fully, the fine may be increased to a maximum of two times the tax advantage.