Value-added tax (VAT) is one of the most important sources of government revenue, not just in Switzerland, but in countries all over the world. Therefore, it’s important for the system to run smoothly and fairly. On 1 January 2018, the revised Value-Added Tax Act (VAT Act) and VAT ordinance entered into force in Switzerland. Moreover, Swiss voters rejected the initiative to raise VAT rates to fund the state pension scheme (AHV/AVS). There are also many new developments in the EU designed to relieve the administrative burden and counter VAT fraud. In this article, we take a brief look at the main changes.
Changes for foreign companies
Under the amended VAT Act, an entity’s liability to pay VAT in Switzerland depends on its worldwide turnover. As a result, any company that generates CHF 100,000 or more in sales revenues anywhere in the world and supplies goods or services in Switzerland will from 1 January 2018 be subject to value-added tax in Switzerland, regardless of its sales in Switzerland (as opposed to the pre-2018 situation where a company is only liable for Swiss VAT if it generates sales of CHF 100,000 or more in Switzerland). There are exceptions for entities based abroad with no Swiss presence, for example if they only supply tax-exempt goods and services or make supplies where the recipient is liable for VAT by way of acquisition tax.
These changes are also relevant for Swiss companies: foreign suppliers of goods and services to Swiss recipients (for example assembly work or work on goods) must generally be registered for Swiss VAT. In such cases, Swiss businesses should check whether their suppliers really are registered to avoid corrections at a later date.
(Online) retailers will be subject to Swiss VAT from 1 January 2019 if they generate sales of at least CHF 100,000 a year with so-called low value consignments to customers in Switzerland. Low value consignments are deliveries incurring VAT of no more than CHF 5 (which means a net value of just under CHF 70 for goods subject to the standard VAT rate, or CHF 200 for goods subject to the reduced rate). Therefore, liability for Swiss VAT arises when a foreign trader takes orders that
- result in a physical movement of goods across the Swiss border,
- are not subject to import tax when imported into Switzerland, and
- lead to total sales revenues of CHF 100,000 or more in Switzerland.
Reduced rate of VAT for electronic media
Newspapers, magazines and books are subject to a reduced rate of VAT. Electronic versions of the same publications, however, used to incur VAT at the full rate. This distinction between printed and electronic matter is leading to increasing problems in practice. The disparity is also seen to put electronic media at a disadvantage.
Since 1 January 2018 newspapers, magazines and books without advertising character distributed electronically are subject to the reduced VAT rate. This is all the more remarkable given that an important difference remains: while the provision of printed matter is treated as a supply of goods from a VAT point of view, providing digital magazines is treated as a supply of services. Providers of media of this type have to make a dual distinction:
- Distinguishing electronic media from other electronic services subject to the standard rate of VAT
- Distinguishing media without advertising character from media with advertising character subject to the standard rate of VAT
New VAT rates in Switzerland
At the end of September 2017, Swiss voters rejected a proposal to fund state pensions with an increase in VAT rates. This resulted in the following decreases in the standard and special rates:
|Until 31 December 2017
|From 1 January 2018