Partial amendment to the VAT Act from 1 January 2018
VAT law in Switzerland will be subject to partial amendments from 1 January 2018. These amendments could have major impacts for foreign companies.
Currently, the threshold for VAT registration is annual turnover in Switzerland of CHF100,000. From 1 January 2018, the threshold remains CHF100,000, but is based on worldwide turnover. Thus, if a company has turnover in Switzerland it will be more likely than not subject to Swiss VAT and the company must register for Swiss VAT accordingly.
A foreign company is exempt from VAT registration in Switzerland if it: only provides services in Switzerland that are subject to the place of supply of a service; the VAT is exempt; and/or it provides deliveries of electricity, gas and heating. It is, therefore, important to keep in mind that not all foreign companies have to register for Swiss VAT if they provide services/goods in Switzerland or to Swiss clients.
In this regard, it is important to clarify where the place of supply of goods and services is - each provided service/good has to be treated and classified separately.
Regulation changes for mailorder companies from 1 January 2019
Within the current VAT law, mailorder companies that deliver goods into Switzerland are subject to Swiss import tax. The person in charge of the customs declaration charges import tax to the recipient. For economic reasons, the Federal Customs Administration waives tax charges of CHF5 or less (small consignments: value of goods of CHF62.50 at the normal VAT rate of 8% or CHF200 at the reduced VAT rate of 2.5%, eg books, magazines, food etc).
From 1 January 2019, mailorder companies with a turnover of CHF100,000 or more of these consignments will have them treated as as domestic deliveries. The company will, therefore, be liable for VAT in Switzerland. The tax liability arises when the qualifying turnover reaches CHF100,000.
From 1 January 2019, mailorder companies must check if they have reached the minimum turnover of CHF100,000 from the above-mentioned small consignments in the previous 12 months. They must also forecast such provisions for 2019. For the forecast, we recommend observing those small consignments in the year 2018 if they generate a turnover of at least CHF100,000. If the company reaches the threshold of CHF100,000 they are liable for Swiss VAT on all deliveries to Switzerland as well as import tax. From the beginning of the tax liability in Switzerland, the company imports the goods on their behalf and therefore can claim back the import VAT in the VAT return.
Mailorder company may register voluntarily for Swiss VAT before reaching the CHF100,000 threshold. They also can apply for the "declaration of subjection: abroad" (Unterstellungserklärung Ausland) which allows companies that are not located in Switzerland to act as the importer before the CHF100,000 threshold is reached. This is makes the change over easier to plan. In order to avoid double taxation, the person in charge of the customs declaration must pass on the import tax to the tax liable company and not the receiver of the goods.
If a company is already in the Swiss VAT register and has small consignments to Switzerland, those supplies do consider as turnover generated abroad as long as the annual limit of CHF100,000 from such supplies is not reached.
General information – VAT registration in Switzerland
Registration for Swiss VAT must take place independently from the company or their representative. Foreign companies or persons need a fiscal tax representative that is located in Switzerland and needs to make a deposit for the security of the tax authorities (bank guarantee for an unlimited period with a Swiss Bank or a cash deposit at the bank account from the tax authorities).
If you would like further information on VAT changes in Switzerland, please contact Dominique Buehler.