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VAT in Switzerland: A Complete Guide

VAT in Switzerland

Switzerland has a business-friendly economy. It has one of the most stable financial positions and it promotes foreign investment by providing tax benefits and exemptions to foreigners. Switzerland also revamped its Value Added Tax (VAT) law to get support from the individuals of Switzerland as well in the development of the government financially. VAT Registration is required to be filed to ensure reporting of taxes by each customer. The burden of taxes is passed on by the companies to the consumers in the form of VAT which is included in the purchase price. Scroll down to check more about VAT in Switzerland.

What is Value-Added Tax (VAT)?

VAT is the tax levied on the consumption of goods and services and is an important source of revenue for the government. The burden of tax is borne by the customers, collected by the businesses, and deposited by businesses to governments. The prices that the customers pay to purchase or avail goods and services include VAT in it.

When a business purchases products or services to produce its goods or provide its services, it can deduct the amount of VAT paid by it from the amount of VAT collected from its customers. This process of deduction is called Input Tax Deduction.

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What is the rate of VAT in Switzerland?

Switzerland has its VAT rate separate from the European Union[1]. All the registered suppliers of goods and services charge an appropriate tax rate and collect tax for onward payment to tax authorities through VAT filings. The current rates at which tax filings are done are:

TypeVAT RateApplicable goods and services
Standard Rate7.7%Clothing, jewelry, watches, alcohol, cars, etc.
Reduced Rate3.7%Food items, books, newspapers, medicines, and other everyday consumer goods and agricultural supplies, water, etc.
Special Rate2.5%Hotel accommodation including breakfast
Zero rate0%Supply of goods and services to airlines and exports.
VAT exemptionNAHealth, Education, Culture, and Rent on Property.

What is the turnover required for a business to start charging customers with VAT in Switzerland?

  • Businesses
    Businesses that have an annual turnover of more than CHF 100,000 must pay VAT by registering with the tax administration. It also applies to foreign companies providing services in Switzerland.
  • Event Organizers
    Event organizers like sports, cultural or other events are required to charge VAT if their turnover from the sale of food, drinks, advertising, etc is CHF 100,000 or more.
  • Clubs
    Charitable Institutions and non-profit organizations running voluntarily and having a turnover of CHF 250,000 or more should register for VAT.

What is the due date for filing VAT in Switzerland?

The due date of VAT in Switzerland is determined based on the time of supply rules in Switzerland. VAT is payable to the tax authorities after 30 days from the end of the VAT reporting period (monthly or quarterly). For goods, the tax point is the time of delivery or passage of title and for services, it is the time of completion of service.

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What is the Compliance for VAT in Switzerland?

In Switzerland, non-resident companies have to follow local rules on VAT invoicing, bookkeeping, and tax rates. It includes:

  • Preparing invoices disclosing details laid down in the VAT laws.
  • Electronic invoices bearing proper signature, authenticity, and agreement of the recipient.
  • Maintenance of records and accounts which must be held for 10 years minimum.
  • Invoicing of customers for the supply of goods and services is to be done as per the Swiss time of supply VAT rules.
  • Using foreign currencies at approved rates.
  • Processing of credit notes and other corrections.

Who needs to register for VAT in Switzerland?

Before the VAT amendment in Switzerland, all foreign companies whose taxable transactions amounted to CHF 100,000 or more had to get themselves registered with Federal Tax Administration. After the amendment, those companies are required to register for VAT who have a global turnover of CHF 100,000 or more. This amendment will have a significant impact on the companies intending to conduct business in Switzerland.

What are the steps for registering for VAT in Switzerland?

Switzerland has a simple registration process as compared to other countries. All businesses that are eligible to pay VAT are required to get themselves registered with the Federal Tax Authority within 30 days from the date tax liability begins. The steps to register VAT in Switzerland are as follows:

  1. VAT position of a company
    In Switzerland, before proceeding with the registration of the company for VAT purposes, it has to review and understand if it is eligible for VAT Registration. If a company has a turnover of CHF 100,000 or more, then it must apply for VAT registration within 30 days. The review must be conducted before the company is subjected to any compulsion from its customers or suppliers. Switzerland also has an option for voluntary VAT registration for a company.
  2. Application for Registration
    After the review, if it is clear that the company has to obtain registration then an authorized person on behalf of the company has to login to the portal, fill in the necessary details in the application form and submit it online. A copy of the application form can be downloaded after successfully submitting the form. Another form is generated which is required to be submitted along with the signature of the foreign company along with the Swiss Fiscal Representative and forwarded to the concerned authorities.
  3. Submission of Application
    After receiving the application, the tax administration passes the judgment either accepting or rejecting the application. If the application is rejected, the company will have to fill out the form again. Whereas if the application is accepted, the tax authority will inform the nominated fiscal representative of the amount to be deposited with the bank along with the security. Finally, the letter of acceptance issued by the tax authority sets out the rules and regulations applicable to the foreign company.
  4. Assigning VAT number
    On receiving the signed form and security money, the tax authority will assign a Swiss VAT number which will be based on a Unique Identification Number (UID) and can be verified online.
  5. UID Number Verification
    After applying, the Swiss Federal Statistical Office issues a letter confirming the UID Number of the company. This letter also contains the method by which information on the UID of the company can be accessed online.
  6. Issuance of Compliance Invoice
    VAT-compliant invoices can be issued by a foreign company only after receiving a VAT Number. Without a VAT number, a foreign company cannot refer to VAT explicitly in an invoice.
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Conclusion

VAT is the most commonly followed indirect tax law in the world. Switzerland has followed VAT for a long time. It amended the VAT law in 2016 which became applicable across the country on 1st January 2018. The amendment was brought to reform the VAT law as per the needs of present date. The amendment will benefit the businesses in the country in the future and ultimately benefit the economy of the nation.

Also Read: How to Incorporate a Company in Switzerland?

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