Global

Details

  • Service: Tax, Global Indirect Tax
  • Type: Regulatory update
  • Date: 11/1/2012

Switzerland: VAT essentials 

Essential information regarding VAT as it applies in Switzerland.


Scope and Rates

What supplies are liable to VAT?


As Value Added Tax, the Swiss Confederation levies:


  • a tax on supplies (supplies of goods and of services) rendered against consideration by taxable persons in Switzerland (domestic tax)
  • a tax on the acquisition of supplies from enterprises with their place of business abroad by recipients in Switzerland (acquisition tax)
  • a tax on the import of goods (import tax).

What is the standard rate of VAT?


The standard rate of VAT is 8 percent.


Are there any reduced rates, zero rates, or exemptions?


Yes. There is a special rate of 3.8 percent for the supply of hotel accommodation (including breakfast).


In addition there is a reduced rate of 2.5 percent for certain goods and services, including:


  • water in pipes
  • food and additives under the Foodstuffs Law
  • cattle, poultry, fish,
  • grains,
  • seeds, planting roots and bulbs, living plants, cuttings, scions and cut flowers and branches, including those used in arrangements bouquets, wreaths, etc. If invoiced separately, the delivery of these goods is also subject to the reduced tax rate, if it is rendered in combination with a taxable supply taxable at the normal rate
  • animal feed, silage acids, scatterings for animals
  • fertilizers, pesticides, mulch and other vegetation used as covering material
  • medication
  • newspapers, magazines, books and other printed matter without advertizing character
  • the services of radio and television companies, except services of a commercial nature
  • certain opted supplies in the field of culture and sport
  • the agricultural supplies, which consist of land cultivation directly related to initial production or cultivation of initial production products connected with the land.

Following supplies can be zero-rated (VAT exempt with input tax credit):


  • the delivery of goods, unless provided for use or exploitation, that are transported or dispatched directly abroad
  • the provision for use or exploitation, in particular the leasing or chartering of goods, provided they are transported or dispatched directly abroad and are used by the recipient of the delivery predominantly abroad
  • the delivery of goods that in connection with a transit procedure, a bonded warehouse procedure, a temporary use customs procedure, or active finishing, or because of storage in a bonded warehouse, were demonstrably subject to customs control in Switzerland
  • the movement, or arranging for the movement, of goods abroad, that is not related to a delivery
  • the transport or dispatch of goods in connection with the import of goods and all related supplies as far as the destination, to which at the time the tax liability is incurred are to be transported
  • the transport or dispatch of goods in connection with the export of goods freely exportable under customs law and all related supplies
  • the rendering of transport services and ancillary logistic activities, such as loading, unloading, trans-shipment, clearing or temporary warehousing, abroad or in connection with goods that are under customs control
  • the delivery of aircraft to airlines that carry on commercially air transport and charter business and whose turnovers from international flights exceed those from domestic traffic; refurbishment, maintenance and servicing of aircraft, which airlines have acquired as part of a delivery; deliveries, maintenance and servicing of goods built into these aircraft or of goods for their operation; deliveries of goods for the maintenance of these aircraft and services that are destined for the immediate needs of these aircraft and their loads
  • the services of intermediaries acting expressly in the name of and for account of others, if the brokered supply is either exempt from the tax under this article or is effected exclusively abroad; if the brokered supply is effected both in Switzerland and abroad, that part of the brokerage is exempt from the tax, which relates to supplies abroad or supplies that are exempt from the tax
  • the services rendered in their own name by travel agents and organizers of events, to the extent they draw on deliveries and services of third parties, which are effected by them abroad; if these supplies by third parties are rendered both in Switzerland and abroad, only that part of the service of the travel agent or of the organizer is exempt from the tax that relates to supplies abroad.

The list of exemptions includes in particular:


  • official postal services
  • healthcare and welfare
  • education and training
  • certain services provided by non-profit organizations
  • certain cultural services
  • insurance and reinsurance
  • financial services
  • supply of certain immovable property (sale and rent)
  • betting, lottery and similar games of chance
  • arbitration services.

Note: it is not possible to recover VAT incurred in making exempt supplies.


What are the other local indirect taxes beside VAT?


Customs duties, stamp duties, duties on tobacco products, duties on mineral oils, duties on beers, etc.

top

Registration

Who is required to register for Swiss VAT?


Swiss Entities


Any person, irrespective of legal form, objects and intention to make a profit, is liable to the tax if that person carries on a business and is not exempt from tax liability. A person carries on a business if that person:


  • independently performs a professional or commercial activity with the aim of sustainably earning income from supplies; and
  • acts externally under his own name.

There is no turnover threshold.


Exempt from tax liability is any person who:


  • within one year generates on Swiss territory turnover from taxable supplies of less than CHF 100,000, unless he waives the exemption from tax liability; the turnover is measured by the agreed considerations without the tax;
  • carries on a business based abroad that makes supplies on Swiss territory subject exclusively to the acquisition tax (reverse charge mechanism); not exempt from tax liability is, however, any person who carries on a business based abroad that supplies telecommunication or electronic services on Swiss territory to recipients who are not liable to the tax (B2C);
  • As a non-profit, honorary sporting or cultural association or as a charitable organization generates on Swiss territory a turnover from taxable supplies of less than CHF 150,000, unless he waives exemption from tax liability; the turnover is measured by the agreed considerations without the tax.

Non-Swiss Entities


The registration rules that apply to Swiss entities also apply to non-Swiss entities.


Overseas businesses must appoint a VAT representative to deal with their VAT affairs.


The fiscal representative takes responsibility for the correct submission of the VAT returns and the payment of VAT. However, he/she is not liable for the tax payable.


Foreign entrepreneurs have to provide security for the VAT by deposing a bank guarantee. The amount of this guarantee depends on the turnover.


Are there penalties for not registering or late registration?


Yes, penalties (fine) may be imposed for infringement of procedural obligations.


Is voluntary VAT registration possible for an overseas company?


Yes, an overseas company can apply for a (voluntary) VAT registration at the conditions mentioned above if it renders supplies in Switzerland.


Are there any simplifications that could avoid the need for an overseas company to register for VAT?


Generally, there are no simplifications that could avoid the necessity to register and account for Swiss VAT.


Does an overseas company need to appoint a fiscal representative?


Yes, taxable persons without a domicile or place of business on Swiss territory must appoint a representative to perform their procedural obligations who has his domicile or place of business on Swiss territory.

top

VAT grouping

Is VAT grouping possible?


Yes. Legal entities with their place of business or a permanent establishment in Switzerland which are closely associated with one another under the common management of a single legal entity may on application combine as a single taxable person (a VAT group). The group may also include legal entities which do not carry on a business, and individuals.


Combination as a VAT group may be elected for the beginning of any tax period. Termination of a VAT group is possible for the end of a tax period.


Can an overseas company be included in a VAT group?


No.

top

Returns

How frequently are VAT returns submitted?


Most registered businesses are required to submit VAT returns on a quarterly basis. However, for businesses using balance tax rates (lump sum calculation method for small businesses), the VAT returns can be submitted half yearly.


For businesses in a regular VAT repayment position, it is also possible to submit VAT returns on a monthly basis upon request.


Failure to settle any outstanding amounts on time result in interest charged. The rates per year are the following:


  • 1 January 1995 to 31 December 2009: 5 percent
  • 1 January 2010 to 31 December 2011: 4.5 percent
  • 1 January 2012 onwards: 4 percent.

In the course of performing the annual financial statement Swiss VAT registered companies must proceed within an eight-month period to the finalization of the VAT returns (i.e. annual financial statement per 31 December, finalization has to be concluded until the end of August at the latest). This process may lead to the filing of an additional VAT return in case of discrepancies between what has been declared during the year and what should have been declared based on the bookkeeping.


Are there any other returns that need to be submitted?


No.


If a business receives a purchase invoice in foreign currency, which exchange rate should be used for VAT reporting purposes? (e.g. central bank’s exchange rate applicable on the date of the invoice)


For the conversion the taxable person can elect to rely on the monthly average rate published by the Federal Tax Administration or the daily exchange rate (selling). For foreign currencies for which the Federal Tax Administration does not publish a monthly average rate, the daily exchange rate (selling) always applies. Taxable persons or entities, which are member of a group, may use the internal group conversion for their conversion.


The procedure chosen (monthly average, daily or group rates) must be retained for at least one tax period.

top

VAT recovery

Can a business recover VAT if it is not registered?


Yes. Under certain conditions overseas businesses can recover Swiss VAT on supplies of goods and services made to them within Switzerland under maintenance of reciprocity with the country of their residence or place of business.


Conditions: the oversea businesses requiring a VAT refund


  • have their place of residence, of business or permanent establishment abroad;
  • are not a taxable person in Switzerland;
  • do not render supplies in Switzerland (with the exception of transport services and services subject to the reverse charge by the recipient); and
  • prove to the Federal Tax Administration their business character (taxable person) in the state of their residence, of their place of business or of the permanent establishment.

The refund of the tax is conditional of the state of residence or of place of business or of the permanent establishment of the applicant enterprise granting a corresponding reciprocal right to Swiss businesses.


Does your country apply reciprocity rules for reclaims submitted by non-established businesses?


Yes, reclaims can be submitted by non-established businesses. Please find below the list of countries for which refund requests filed by businesses from those countries should be accepted:


  • Australia
  • Austria
  • Belgium
  • Barhain
  • Bermuda
  • Bulgaria (restricted to services in connection with the attendance on conferences, seminars, congresses, and similar events, services in connection with the attendance on exhibitions, fairs and similar events, transport services).
  • Canada (VAT refund only in connection with accommodation services (maximum 30 days), exhibition services, attendance on international conferences, and seminars, which are not open to the public)
  • Croatia
  • Cyprus
  • Czech Republic
  • Denmark (VAT refund on accommodation, food and beverages only 25 percent)
  • Estonia
  • Finland
  • France
  • Germany (no VAT refund on fuel and all inclusive travel expenses)
  • Greece
  • Hong Kong
  • Hungary
  • Ireland
  • Israel
  • Italy
  • Japan
  • Latvia
  • Lithuania
  • Luxembourg
  • Macedonia
  • Monaco
  • The Netherlands
  • Norway
  • Poland
  • Portugal
  • Romania
  • Saudi Arabia
  • Sweden
  • Taiwan
  • Slovakia
  • Slovenia
  • Spain
  • Turkey (VAT refund only in connection with transport services, fuel, and attendance on exhibitions)
  • United Kingdom (no reciprocity with Jersey, Guernsey, and other Channel Islands (Herm, Sark, Alderney))
  • United States.

Are there any items that business cannot recover VAT on?


Yes. The tax refund for the VAT paid in Switzerland is commensurate in scope and limitations with the right of input tax deduction for VAT registered entities.


  • Exempt supplies: where VAT relates to both taxable and exempt supplies, businesses need to make an apportionment.
  • Non-business (including private) activities: where VAT relates to both business and non-business activities, an apportionment is required.
  • Motor cars (excluding commercial vehicles): where the purchase/lease and other related expenses of a car relates to both business and non-business use, VAT is recoverable only to the extent of the business use.

top

International Supplies of Goods and Services

How are exports of goods and services treated?


Goods


The export of goods out of Switzerland can be zero-rated, provided the exportation can be proven by an official export document of the Swiss Customs administration.


Services


Standard rule: The place of a supply for services is deemed to be the place, at which the recipient of the service has its place of business or a permanent establishment, for which the service is rendered, or in the absence of such a place of business or such a permanent establishment, its place of residence or the place of his or her normal abode.


Exceptions:


The place of the following services is deemed to be:


  • for services, which typically are rendered directly in the physical presence of individuals, even if exceptionally they are rendered at a distance: the place, at which the person rendering the service has its place of business or a permanent establishment, or in the absence of such a place of business or such a permanent establishment the place of residence or the place, from which the person works; such services are in particular: healing treatments, therapies, nursing, personal hygiene, marriage, family and life counseling, social services and social welfare services and child and youth care
  • for services provided by travel agencies and event organizers: the place, at which the person rendering the service has its place of business or a permanent establishment, or, in the absence of such a place of business or such a permanent establishment, the place of residence or the place, from which the person works
  • for services in the area of culture, the arts, sport, the science, scholarship, entertainment or similar services, including services of the event organizer and related services, if applicable: the place, at which these activities are actually performed
  • for hotel and restaurant services: the place, at which the service is actually rendered
  • for passenger transport services: the place, at which measured by the distance travelled the transport actually takes place; the Federal Council can order that, in the case of cross-border transport, short internal distances can count as foreign and short distances abroad as internal distances
  • for services in connection with real property: the place, at which the property is situated; such services are in particular: broking, management, survey and valuation of the property, services in connection with the purchase or creation of mortgages on the property, services in connection with the preparation or the coordination of construction services, such as architectural, engineering and construction supervision services, surveillance of properties and buildings and accommodation services
  • for services in the area of international development cooperation and humanitarian help: the place, for which the service is destined.

How are goods dealt with on importation?


When goods are imported into Switzerland, import VAT (and in some cases customs duty (based on the weight of the product)) may be due. This has to be paid or secured before the goods will be released from Customs' control (the taxpayer either has to pay duties via the applicable electronic platform, or should make use of a VAT deferment scheme (subject to securities)).


How are services which are brought in from abroad treated for VAT purposes?


Services with a place of supply in Switzerland according to the standard rule mentioned above provided by suppliers domiciled outside of Switzerland to recipient domiciled in Switzerland are subject to a reverse charge mechanism. Services mentioned under the exception do not need to be reverse charge, even if the place of supply is deemed to be in Switzerland.


VAT registered persons are required to reverse charge theses services in their ordinary VAT returns.


Non taxable persons (not registered for VAT purposes) acquiring from abroad services subject to the reverse charge are required to declare these on an annual basis if the services acquired exceed the threshold of CHF 10’000 p.a.

top

Invoices

Is a business required to issue tax invoices?


In theory, no since the Swiss VAT legislation states that “the supplier must on request issue to the recipient of the supply an invoice, which satisfies the requirements”. In practice, an invoice has to be issued to VAT taxable recipient in order to allow the latter to recover the input VAT.


What do businesses have to show on a tax invoice?


The invoice must clearly identify the supplier, the recipient and the nature of the supply and as rule contain the following elements:


  • the name and the location of the supplier in the form in which he presents himself in business transactions, a note that he is registered as a taxable person and the number under which he is entered in the Register of Taxable Persons
  • the name and location of the recipient of the supply in the form in which he presents himself in business transactions
  • the date or period of the provision of the supply, in the event that it differs from the invoice date
  • the nature, object and extent of the supply
  • the consideration for the supply
  • the applicable tax rate and the tax amount payable on the consideration; if the consideration includes the tax, details of the applicable tax rate suffice.

Can businesses issue invoices electronically?


Yes. Invoices and equivalent documents may be issued by electronic means provided that the origin, authenticity and integrity are guaranteed by an advanced electronic signature.


Is it possible to operate self-billing?


Yes.


Can a business issue VAT invoices denominated in a foreign currency?


Yes.

top

Transfers of Business

Is there a relief from VAT for the sale of a business as a going concern?


Yes. If a company sells its business as a going concern then VAT may not be due. There are certain conditions to satisfy, for example the taxable person should declare the taxable supply and service to the Federal Tax Administration in writing (known as the notification procedure, a TOGC). If such a transfer is found, VAT is neither chargeable, nor payable to the Swiss authorities.

top

Options to Tax

Are there any options to tax transactions?


There is an option to tax all types of tax exempt transactions. However, no option is possible for:


  • insurance and reinsurance turnovers;
  • financial services
  • betting, gambling and lottery (to the extent they are subject to a special tax or other duties)
  • the transfer and the creation of rights in real estate and the supplies of commonhold property associations to the commonhold property owners (subject to conditions) and the renting of immovable properties for private purposes.

top

Head Office and Branch transactions

How are transactions between head office and branch treated?


Switzerland is not applying the single entity principle. Transactions between head office and branch located in 2 separate jurisdictions (one thereof in Switzerland) are regarded as transactions between separate entities. Supplies of services between the head office and the branch are therefore subject to VAT according to the rules on cross border supplies.

top

Bad Debt

Is a business able to claim relief for bad debts?


Businesses may only claim VAT relief for bad debts if the debt has been written off in the accounts and evidence is maintained that the debt is bad and will not be repaid by the customer.

top

Anti-Avoidance

Is there a general anti-avoidance provision under VAT law?


There are limited anti-avoidance provisions in the Swiss VAT Law. The definition of abusive practices can be found in the case law.

top

Penalty Regime

What is the penalty and interest regime like?


Assessments can be made by the Swiss tax authority if VAT has been underpaid. Penalties and interest may also be imposed. Assessments must be made by the Swiss tax authority within five years after the end of the calendar year in which the tax liability arose.

top

Tax authorities

Tax audits


How often do tax audits take place?


No specific rule


Are there audits done electronically in your country (e-audit)? If so, what system is in use?


No


Advance rulings and decisions from the tax authority


Is it possible to apply for formal or informal advance rulings from the (indirect) tax authority?


Yes


Are rulings and decisions issued by the tax authorities publicly available in your country?


No

top

Miscellaneous

In your country, are there unique specific indirect tax rules (regimes) that differ from standard indirect tax rules in other jurisdictions?


Yes. For example: broad definition of supplies of goods, input VAT recovery for holding companies, head-office/branches rules.


Are there indirect tax incentives available in your country (e.g. reduced rates, tax holidays)?


No

 

Share this

Share this

Meet the team

KPMG’s Global Indirect Tax team members are based around the world.

Country VAT/GST essentials