Global

Details

  • Service: Tax, Global Indirect Tax
  • Type: Regulatory update
  • Date: 7/18/2014

Switzerland - Opportunities with EU VAT rule change in 2015 

July 18:  Telecommunications and broadcasting companies, as well as providers of electronic services to consumers, are at a disadvantage when it comes to value added tax (VAT) if they are established outside the European Union—such as in Switzerland. However, beginning 1 January 2015, when new EU VAT rules become effective, this will no longer be the case.

Background

EU telecommunications and broadcasting companies as well as providers of electronic services to EU consumers (B2C) are taxed where the supplier is established.


If the electronic services are provided by a non-EU business, they are taxed where the EU consumers are established or the services are used and enjoyed.


For example, a Luxembourg supplier currently must charge a 15% Luxembourg VAT rate (lowest rate in the EU) to EU consumers regardless where they are established, whereas a Swiss supplier must charge the VAT rate of the EU Member State where EU consumers are domiciled or the services are used and enjoyed—so that the VAT rate can range from 15% to 27% depending on the location.

VAT change effective 2015

As from 1 January 2015, EU businesses and non-EU businesses will be treated equally from a VAT point of view.


Accordingly, telecommunications, broadcasting, and electronically supplied services provided to EU consumers will be taxed where the consumers are domiciled—regardless of where the suppliers are established.


For example, a Hungarian customer will pay 27% Hungarian VAT on the received services whether it is provided by a Luxembourg or a Swiss supplier.


Along with the change of the place-of-supply rules, a “Mini One Stop Shop” will be introduced, giving both EU suppliers and non-EU suppliers the possibility to register for VAT in a single EU Member State through which they will account for VAT on services to customers in other EU Member States.


For B2B services, the rules will not change—they are and will be taxed in the EU Member State where the recipient is established (reverse-charge mechanism) regardless of whether the supplier is established in the EU or not.

KPMG observation

Beginning 2015, there will no longer be a VAT disadvantage for businesses providing B2C services to EU consumers established in Switzerland. Because of this change, EU businesses may want to reconsider establishing their businesses in Switzerland for various reasons.


Read a July 2014 blog posting by the KPMG member firm in Switzerland: EU VAT rules change in 2015: Establishing your business in Switzerland?




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The KPMG logo and name are trademarks of KPMG International.


KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever.


The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.


Direct comments, including requests for subscriptions, to us-kpmgwnt@kpmg.com.
For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at:

+ 1 202 533 4366

1801 K Street NW
Washington, DC 20006.

 

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