Upcoming revision of the VAT Act: an opportunity for investment foundations

Gilles Widder
VAT Senior Manager, PwC Switzerland

Current situation

At present, only the offering of shares in collective investment schemes of investment funds under Swiss and foreign law as well as the management of collective investment schemes of investment funds under Swiss law within the meaning of the CISA are not subject to VAT. Consequently, the offering of investment groups of investment foundations and the management of investment groups within the meaning of the BVG do not fall under the VAT exemption provision.

As a general rule, an investment foundation meets the needs of a pension scheme better than a fund. Despite this, investments in collective investment schemes, which benefit from differentiated taxation under the current VAT legal framework, have continued to be more attractive. The benefits of the pension instrument that was specifically provided for by the legislator have therefore been limited so far.

Revision of the law

On 16 June 2023, the National Council and the Council of States adopted the partial revision of the VAT Act after deliberating on a number of issues, including the taxation of electronic mail order platforms and travel agencies.

One new provision in particular is worthy of our attention. The offering of investment groups of investment foundations and the management of investment groups within the meaning of the BVG by persons that manage or hold them, as well as the custodian banks and their agents, must be regarded as services exempt from VAT in future after the revised law comes into force.

Opportunities and things to consider

The value added tax disadvantage of investment foundations compared to investment schemes under the CISA is eliminated. This will result in investment foundations becoming much more attractive.

For their part, companies which are active in offering and managing investment groups must also consider this change in tax treatment to reflect the exemption and determine any potential impact on their right to deduct input tax.

Date of entry into force

The partial revision of the Value Added Tax Act is expected to enter into force on 1 January 2025. There is the possibility of an optional referendum being held against the new provision of the law, but this is not expected to happen. However, should a vote on the partial revision be held contrary to expectations, this would delay its entry into force.

Please do not hesitate to get in touch with us if you would like to discuss these changes as well as the opportunities to be embraced and measures that need to be taken in order to correctly take the effects of this change in the law into account.

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