Switzerland: Partial Amendment VAT Act From 1 January 2018 and 1 January 2019

Reduction of Swiss VAT Rate

As a result of the referendum on 24 September 2017 the VAT rates will be adjusted as of 1 January 2018. The new VAT rates can be summarised in the table below:

 

Normal rate

Special rate for accommodation services

Reduced rate

Current VAT rates

8.0%

3.8%

2.5%

VAT rates as per 1.1.2018

7.7%

3.7%

2.5%

 

Partial Amendment VAT Act from 1 January 2018

The VAT law in Switzerland will have some partial amendments from 1 January 2018. These amendments could have some major impacts for foreign companies.

Currently, the threshold for VAT registration is CHF 100'000 turnover per year in Switzerland. From 1 January 2018, the threshold remains at CHF 100'000 but based on worldwide turnover. Thus, if a company has any turnover in Switzerland, it will be more likely than not, subject to Swiss VAT and the company has to register for Swiss VAT.

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 service, the VAT is exempt and/or some deliveries of electricity, gas and heating. Thus, it is important to keep in mind that foreign companies have to register for Swiss VAT if they provide services or goods in Switzerland or to Swiss clients.

In this regard, it is important to clarify the place of supply of goods and services. To clarify this, each provided service or good has to be treated and classified separately.

Regulation Changes for Mail-order Companies from 1 January 2019

With the current VAT law, mail-order companies that deliver goods into Switzerland are subject to the Swiss import tax. The person in charge of the customs declaration charges the import tax to the recipient. For economic reasons, the Federal Customs Administration waives to charge tax amounts of CHF 5 or less (small consignments: value of goods of CHF 62.50 at the normal VAT rate of 7.7% or CHF 200 at the reduced VAT rate of 2.5% like books, magazines, food etc.).

From 1 January 2019 mail-order companies that have a turnover of CHF 100'000 or more, from consignments where deliveries are considered as domestic deliveries, the company will be liable to VAT in Switzerland. The tax liability arises when the qualifying turnover reaches CHF 100'000.

Thus, a mail-order company has to check from 1 January 2019 if they have reached a minimum turnover of CHF 100'000 from the above-mentioned small consignments from the previous 12 months. They also have to forecast such provisions for 2019. For the forecast we recommend to observe those small consignments in 2018 and consider whether they generate a turnover of at least CHF 100'000. If the company reaches the threshold they will be liable for Swiss VAT on all deliveries to Switzerland as well as any 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.

It is possible for the mail-order company to register voluntarily for Swiss VAT before reaching the threshold of CHF 100'000. They can also 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 CHF 100'000 threshold is reached. This makes the transition easier to plan. In order to avoid double taxation, the person in charge with the customs declaration must pass on the import tax to the tax liable company and not the recipient of the goods.

If a company is already registered to Swiss VAT and has small consignments to Switzerland, those supplies do consider as turnover generated abroad as long as they do not reach the annual limit of CHF 100'000 from such supplies.

General Information – VAT Registration in Switzerland

The registration for Swiss VAT has to 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).

Contact:

Feel free to contact Dominique Bühler (dominique.buehler@bakertillyobt.ch) for additional information.