Swiss VAT

Swiss VAT is an indirect consumption tax levied on goods and services sold in Switzerland. It is also known as value-added tax. This tax system was introduced in Switzerland in 1995 to replace the old sales tax system. The Swiss VAT system is relatively straightforward. Companies selling goods or services are required to collect VAT from their customers and remit it to the Swiss tax authorities. VAT is calculated on the basis of the VAT rate applicable to the goods or services sold. In Switzerland, all companies with annual sales of over CHF 100,000 are required to comply with Swiss VAT (art. 10 LTVA). Companies with sales below this threshold may, however, voluntarily register for VAT to benefit from certain tax deductions or to comply with their customers’ requirements. Foreign companies carrying out business transactions in Switzerland are also required to comply with Swiss VAT, unless they are exempt under an international tax treaty or only carry out VAT-exempt transactions in Switzerland. The Swiss legislation in force is the federal law governing value-added tax (LTVA), as well as its ordinance (OTVA).

The Swiss VAT rate

In Switzerland, there are three different VAT rates: standard, reduced and special. The standard rate is 7.7% and applies to most goods and services. It applies when the other two above-mentioned rates do not apply. The reduced rate is 2.5% and applies to essential goods such as foodstuffs, medicines and books. Finally, the special rate of 3.7% applies to housing benefits. Please note that from January 1, 2024, the standard rate will be 8.1%, the reduced rate 2.6%, and the special rate for accommodation 3.8%. However, there are also exceptions to these VAT rates in Switzerland. For example, exports of goods are exempt from VAT. Imports of goods, on the other hand, are subject to import VAT (art. 50 ff LTVA). Services provided outside Switzerland are not subject to Swiss VAT, but services provided in Switzerland are in principle subject to Swiss VAT, regardless of the nationality of the supplier. It is important to note that certain goods and services are exempt from VAT in Switzerland. For example, medical services, banking, property rental and insurance are not subject to VAT. Cultural services such as shows, concerts and exhibitions are also exempt from VAT in Switzerland. Finally, there are special cases where the VAT rate applied depends on the use of the good or service. For example, passenger cars are subject to a reduced VAT rate of 3.7% if used for business purposes, but to a standard rate of 7.7% if used for private purposes. Similarly, restaurant meals are subject to a standard VAT rate of 7.7%, but if they are supplied as part of a collective catering service, the VAT rate is reduced to 2.5%. It is therefore important for companies in Switzerland to understand the different VAT rates in force, as well as the exceptions to these rates, in order to be able to comply with them correctly.

VAT tax obligations

All companies making sales subject to VAT must comply with VAT-related tax obligations. This includes invoicing, VAT declaration and VAT recovery. Invoicing is an important obligation for companies selling goods or services subject to VAT. Invoices must be issued in accordance with Swiss VAT rules, and must include certain mandatory information such as the supplier’s and customer’s VAT numbers. VAT declaration is also an important obligation for companies. These companies must declare the VAT collected on their sales, as well as the VAT they have paid on the goods and services they have purchased. If the VAT collected is higher than the VAT paid, the company must pay the difference to the Swiss tax authorities. Companies can also reclaim VAT on goods and services purchased for their business. However, this recovery is subject to certain rules and procedures. Companies must provide proof of purchase and comply with VAT deduction rules.

The advantages and disadvantages of Swiss VAT

Swiss VAT offers a number of advantages for businesses and consumers. Firstly, it simplifies taxation by avoiding the multiple taxes that exist in some countries. Secondly, it allows companies to deduct the VAT they have paid on their business purchases, which can reduce their tax burden. Last but not least, it generates significant revenues for the State, enabling it to finance public services. However, Swiss VAT also has its drawbacks. Firstly, it can increase the cost of living for consumers, who have to pay a tax on every good or service they buy. Secondly, it can be difficult to understand for individuals and small businesses who are not used to dealing with tax obligations. Finally, it can create an administrative burden for companies that have to comply with VAT tax obligations.