The Swiss VAT system plays a significant role in generating revenue for the government and ensuring the smooth functioning of the economy. This article aims to provide a comprehensive guide to understanding the Swiss VAT system, its applicability, rates, registration, and compliance requirements.
VAT Rates in Switzerland
Switzerland operates a tiered VAT rate system. In 2023, the standard VAT rate in Switzerland is 7.7%. However, there are reduced VAT rates applicable to specific goods and services. The reduced rate is 2.5% for essential items such as food, water, books, and pharmaceutical products. Certain services such as accommodation, cultural events, and public transportation may also be subject to the reduced rate. Additionally, there is a special rate of 3.7% for hotel accommodation services.
VAT Rates in Switzerland for 2024
As from 1 January 2024, the following new VAT rates will be applicable in Switzerland (including Municipality of Liechtenstein) :
- New standard rate: 8.1% (+0.4)
- New reduced rate: 2.6% (+0.1)
- New accommodation rate: 3.8% (+0.1)
Partial payments for supplies rendered before 31 December 2023 are subject to the current VAT rates and can be invoiced under the current rates. Similarly, partial payments for supplies rendered as of 1 January 2024 must be invoiced with the new VAT rates (note that the SFTA has announced that the Q3 2023 VAT return form will already cater for the new rates).
When to apply new VAT Rates in Switzerland for 2024?
You need to consider the new VAT rates already in 2023 for bills and invoices for which the service is splling over into 2024. For example, let's say you receive an invoice on August 2023 for 1,200 CHF which has a VAT of 7.7% for a 1 year service that will end in July 2024. For the period of August - December 2023, you need to apply the VAT rate of 7.7% and for the period of January - July 2024 you need to apply the VAT rate of 8.1%. In this case, you take take 1,200 / 12 months to get 100 CHF per month. For August - December 2023, your rate is (100 x 5 months) x 7.7% which equals 38.50 CHF of input VAT. For the period January - July 2024, your rate is (100 x 7 months) x 8.1% which equals 56.70 CHF of input VAT.
This also applies to output VAT when invoicing customers for a service that will spill into 2024. Be sure to split the amounts for 2024 to include the new VAT rate of 8.1%.
Swiss VAT Registration
Businesses that reach or exceed an annual turnover of CHF 100,000 must register for Swiss VAT. Voluntary registration is also possible if the annual turnover is below this threshold. Non-resident businesses providing taxable supplies in Switzerland are required to register for VAT regardless of their turnover. Registration can be done through the Federal Tax Administration (FTA), either online or by completing the relevant forms.
If I pass 100,000 CHF in annual revenue do I pay Swiss VAT on the entire 100,000 CHF?
If your annual turnover exceeds the CHF 100,000 threshold and you are required to register for VAT, you would generally need to apply Swiss VAT to all applicable revenue, not just the amount that exceeds CHF 100,000. This means that once you exceed the CHF 100,000 threshold, you would need to charge Swiss VAT on all your taxable sales, including those that were generated before reaching the threshold.
When to include Swiss VAT on your invoice?
As a Swiss business, you are generally required to include VAT on your invoices when you provide taxable supplies of goods or services. Here are some guidelines to determine when to include VAT on your invoices:
- Domestic Sales: When you sell goods or services to customers within Switzerland, VAT should be included on your invoices if the supplies are taxable. This applies regardless of whether your customer is a business or an individual.
- Export Sales: If you sell goods to customers located outside Switzerland (exports), these transactions are generally zero-rated for VAT purposes. This means that you do not charge VAT on the invoice. However, specific export documentation and compliance requirements may apply.
- Import Sales: When you import goods into Switzerland, VAT is typically charged at the border by the Swiss customs authorities. In this case, you may not need to include VAT on your invoice for the imported goods, as it has already been accounted for during the import process.
- Services: VAT on services can be more complex, especially when provided to customers outside Switzerland. The general rule is that services are subject to VAT in the country where the recipient is located. However, there are certain exceptions and special rules depending on the nature of the services and the location of the customer.
Consulting services Swiss VAT
If your consulting services are provided to a business located in Switzerland, you would typically include VAT on your invoices. However, if your consulting services are provided to a business located outside of Switzerland, you would generally not charge VAT on your invoices.
Here are a few key points to consider:
- Domestic Consulting Services: If you provide consulting services to a business located within Switzerland, the services are considered taxable within Switzerland. In this case, you would include VAT on your invoice at the applicable rate (e.g., the standard rate of 7.7% or reduced rates if applicable).
- International Consulting Services: If you provide consulting services to a business located outside of Switzerland, the services are typically considered as exported services. As a general rule, these exported services are not subject to Swiss VAT, and you would not charge VAT on your invoice. However, it's important to review specific rules and exceptions that may apply to the particular country where your customer is located.
What is Swiss Input VAT?
Swiss input VAT, also known as input tax, refers to the value added tax that a business pays on its purchases and expenses related to taxable supplies. It is the VAT amount that a business incurs when it buys goods or services for its business activities.
Here are some key points to understand about Swiss input VAT:
- Definition: Input VAT is the VAT that is charged by suppliers on their sales invoices to your business. When you make purchases for your business, you pay this VAT amount as part of the total cost.
- VAT Deduction: Swiss input VAT is deductible, meaning that businesses can claim a deduction for the VAT paid on their purchases. The input VAT deduction allows businesses to reduce their VAT liability by offsetting the VAT paid against the VAT charged on their taxable supplies.
- Record-Keeping: To claim input VAT deductions, businesses must maintain proper records of their VAT invoices, receipts, and other supporting documentation. These records should clearly show the VAT amount paid and the VAT registration number of the supplier.
- Deductible VAT: Generally, input VAT on purchases related to taxable supplies can be deducted. This includes VAT paid on goods, services, and other business expenses that are directly related to the provision of taxable supplies.
- Exceptions and Restrictions: Some expenses may have restrictions on input VAT deduction. For example, entertainment expenses and certain personal expenses may have limited or no input VAT deduction allowed. It's important to understand the specific rules and exceptions that apply to your business activities.
- VAT Recovery: If your input VAT exceeds your output VAT (VAT collected on sales), resulting in a surplus, you may be eligible for a VAT recovery or refund. This occurs when the VAT paid on your purchases exceeds the VAT charged on your taxable supplies.
- Reporting: Input VAT is reported on your VAT return as part of the calculation for determining the net VAT liability or refund. It is important to accurately record and report the input VAT to ensure compliance with VAT regulations.
What does it mean to be Swiss VAT exempt?
If your business is VAT exempt in Switzerland, it means that you do not charge VAT on your sales or services, and you do not have to register for VAT. However, one consequence of being VAT exempt is that you generally cannot claim input VAT deductions or recover the VAT paid on your purchases and expenses.
The reason behind this is that input VAT deductions are only available to businesses that are registered for VAT and charge VAT on their taxable supplies. Since VAT-exempt businesses do not charge VAT, they do not have the right to claim input VAT deductions.
How does Swiss VAT reverse charge work?
The Swiss VAT reverse charge mechanism is a procedure that shifts the responsibility for reporting and paying VAT from the supplier to the recipient of goods or services. It applies in specific situations involving transactions with foreign suppliers. Here's how the Swiss VAT reverse charge works:
- Applicability: The reverse charge mechanism applies in two main scenarios:
- Importation of Goods: When importing goods into Switzerland, the VAT is usually paid at the border. However, if the supplier is a foreign entity and not registered for Swiss VAT, the recipient (importer) becomes responsible for accounting for the VAT through the reverse charge mechanism.
- Receipt of Services: If you receive services from a foreign supplier who is not registered for Swiss VAT, the reverse charge mechanism may apply. This generally occurs when the services are subject to Swiss VAT and are deemed to be received in Switzerland.
- Supplier Invoice: The supplier's invoice should clearly indicate that the reverse charge mechanism applies. The invoice should either omit VAT or state that VAT is accounted for by the recipient. This allows the recipient to self-account for the VAT.
- VAT Reporting: As the recipient, you need to self-account for the VAT on your VAT return. You report both the output VAT (VAT due on your sales) and the input VAT (VAT you can claim as a deduction) in the appropriate sections of your VAT return. The VAT amount effectively cancels each other out, resulting in no net VAT liability or refund.
- Record-Keeping: It is essential to maintain proper records of invoices, receipts, and other supporting documentation related to transactions subject to the reverse charge. These records should be retained for the required period (typically seven years) and made available for VAT audits.
- Compliance: It is crucial to ensure compliance with the reverse charge requirements, as errors or omissions may result in penalties or other consequences. Familiarize yourself with the specific rules and guidelines provided by the Swiss Federal Tax Administration to ensure accurate reporting and adherence to VAT obligations.
It is important to note that Swiss VAT reverse charge should be applied to all supplier invoices coming from abroad. It is not just limited to supplier invoices in Europe. Even if you receive an invoice from Australia for example in Australian dollars, you should apply a Swiss VAT reverse charge.
Does Swiss VAT reverse charge mechanism zero out?
Under the reverse charge mechanism, the VAT liability and input VAT can indeed be offset, resulting in no net VAT liability or refund. This mechanism is applicable when the recipient of goods or services is responsible for accounting for the VAT instead of the supplier.
In the case of the reverse charge, the recipient of the goods or services reports both the output VAT (VAT due on sales) and the input VAT (VAT that can be claimed as a deduction) on their VAT return. If the input VAT equals the output VAT, they can effectively zero out the VAT liability and input VAT.
There is no field in the VAT return for Reverse Charge. The amount is just added to the Input VAT and Output VAT sections of the VAT Return.
Does Swiss VAT reverse charge apply to all vendors abroad?
Yes Swiss VAT reverse charge applies to all vendors abroad which have rendered services to you as a Swiss entity. The Swiss Art 45.2 let b even goes as far as stating that if you received services totalling less than 10,000 CHF per year from a vendor abroad, you do not need to report Swiss VAT reverse charge on this vendor. However to be safe, it is always recommended to report Swiss VAT reverse charge since this typically nets out to zero in your tax return and you do not really know until year end whether the vendor will have provided services in excess of 10,000 CHF.
Unless you are filing under the flat rate scheme or you are VAT exempt, then then 10,000 CHF threshold for each vendor does not need to be tracked as there is no added benefit to your entity.
Why is Swiss VAT sometimes 2.5% or 3.7%?
In some industries, Swiss VAT can be charged at a lower rate. The most common is restaurants where they will charge you Swiss VAT of 2.5%. You will see this on your receipt. Swiss VAT 3.7% can also be charged by hotels after your stay. You will see this on your hotel invoice. If you are abroad having dinner for example in an Italian restaurant, you will not see 2.5% VAT on your Italian restaurant receipt. The receipts for Swiss VAT 2.5% is only applicable to domestic receipts in Switzerland.
Can I claim back input Swiss VAT when I eat at a restaurant abroad?
If you eat at a restaurant abroad say in Italy or Germany and your receipt shows input VAT, you cannot claim this back on your Swiss VAT return. That VAT is incurred in the country where the good was purchased and settled in that country and cannot be claimed back in Switzerland. Similarly when you take an Uber in France for example, you cannot claim back any Swiss input VAT for that Uber.
Is Swiss VAT included in the total amount or excluded?
Ensure that you check whether the invoices are inclusive or exclusive of VAT. Sometime VAT is included in the price and sometimes it is excluded. Be aware of this and choose the right option in your accounting system when adding VAT.
Do I need a receipt for each expense in order to claim back my Swiss VAT?
Yes you need to keep all receipts and invoices if you wish to claim this back on VAT. Even restaurant receipts need to be kept and included in your account to claim back any Swiss VAT from the authorities.
Can an invoice or receipt have two Swiss VAT rates on it?
Yes an invoice or receipt can have two Swiss VAT rates on it. For example, you could an invoice from an event which has a hotel + a service included. In this invoice, the hotel Swiss VAT rate would be 3.7% and the Swiss VAT for the service would 7.7% on the amount. If you receive such an invoice, it's important to apply the right Swiss VAT rate on the corresponding amount.
Can Swiss VAT exempt businesses zero out reverse charge?
No, VAT-exempt businesses generally cannot zero out the reverse charge mechanism. VAT-exempt businesses, by definition, do not charge VAT on their sales or services, and they are not eligible to claim input VAT deductions. Therefore, they do not have the necessary VAT liability and input VAT to offset each other under the reverse charge mechanism.
Swiss VAT Compliance and Reporting
Registered businesses are required to maintain proper VAT records and issue tax-compliant invoices. VAT returns must be submitted periodically to report the collected VAT on supplies made and the input VAT on purchases. The standard VAT return period is quarterly, but businesses with a turnover above CHF 5 million may opt for monthly VAT returns.
Swiss VAT for crypto businesses
The application of Swiss VAT on crypto payments depends on the specific nature and circumstances of the transaction. Here are some general guidelines on how Swiss VAT may apply to crypto payments:
- Exchange of Cryptocurrencies: If you exchange cryptocurrencies for fiat currency (e.g., Swiss Francs) or vice versa, it is generally considered a taxable transaction for VAT purposes. The exchange service provider would typically charge VAT on their fees or margins unless they have received an exemption from the authorities as a financial service provider.
- Sale of Goods and Services: If you accept cryptocurrencies as a form of payment for the sale of goods or services, the transaction may be subject to Swiss VAT. The VAT treatment would be similar to traditional currency transactions, and you would need to charge VAT on the goods or services provided.
- Crypto-to-Crypto Transactions: Crypto-to-crypto transactions, where cryptocurrencies are exchanged directly without involving fiat currency, are generally not subject to VAT in Switzerland. However, it's important to note that the tax treatment of such transactions may vary depending on the specific circumstances and the regulatory guidance provided by the Swiss tax authorities.
- Token Offerings (ICOs/STOs): Initial Coin Offerings (ICOs) and Security Token Offerings (STOs) involve the issuance and sale of tokens or digital assets. The VAT treatment of these offerings depends on their specific characteristics, such as whether they represent securities or utility tokens. It's advisable to seek professional advice and consult with the FTA for guidance on the VAT implications of token offerings.
Is there VAT on a utility token?
In general, the provision of access to a product or service is considered a taxable transaction for VAT purposes. However, the VAT treatment of utility tokens can vary based on their specific characteristics and the regulatory framework in a particular jurisdiction.
Utility tokens, which provide access to a product or service within a specific blockchain-based platform, may be treated differently for VAT purposes compared to traditional goods and services. In some cases, the issuance or sale of utility tokens may not trigger a VAT liability because they are not considered physical goods or services in the traditional sense.
Swiss VAT for crypto staking and token rewards
For staking related activities, it can be difficult to judge whether Swiss VAT should be applied. It is important to keep in Art. 18 (1) of the VAT Act, which states domestic services that are provided for consideration and for which there is no tax exemption are subject to VAT. The difficult here is to identify whether staking revenues are generated from customers or services provided domestically in Switzerland. A potential reference point for identifying whether Swiss VAT should apply in staking scenario is to identify the location of the validator. Should the validator be located in Switzerland, then authorities could argue that the place of the recipient applies (Art. 8 (1) VAT Act) and Swiss VAT should be applied.
In theory, this approach is correct but to apply it can be difficult since you won't know the exact location of all your validators. Therefore the Swiss authorities would require you to apply VAT to all your staking rewards where the validators location is unknown. As you can imagine, this can add up. Therefore, you can submit a Swiss VAT ruling with the authorities. One Swiss VAT ruling we've encountered is to use Swiss GDP vs World GDP as a proxy percentage to apply to all transactions where the validator's location is unknown. In this scenario, you would apply Swiss VAT on 0.8% all transactions coming from validators where their location is unknown. You will have to obtain such a ruling before applying such rate.
A great article on this was published by MME title Delegation of Tokens, Staking Rewards and VAT.
Swiss VAT for crypto mining and token rewards
Cryptocurrency mining is the process of validating transactions and adding them to a blockchain while also creating new units of the cryptocurrency as a reward. When someone initiates a cryptocurrency transaction, it needs to be verified and added to the blockchain to ensure its legitimacy. Miners are responsible for performing this verification. Miners compete to solve complex mathematical puzzles that require significant computational power. Once a miner successfully solves the puzzle, they create a new block containing a batch of verified transactions. As a reward for their efforts and to incentivize participation, the miner who successfully added the block is rewarded with a certain number of newly minted cryptocurrency units.
When applying Swiss VAT on this rewards, one theoretically needs to identify the recipient of the service provided by the miner. In this case, the recipient of the services is the one who executed the transaction. As you can imagine, this can be virtually impossible to identify and therefore the Swiss authorities would request that you apply VAT to all mining rewards where the recipient's location is not known. This can drastically hurt your business model and create a lot of administrative issues.
Therefore one proposition is to apply for a Swiss VAT ruling for mining. One Swiss VAT ruling we've encountered is to use Swiss GDP vs World GDP as a proxy percentage to apply to all transactions where you receive mining rewards and the recipient of the service is unknown. In this scenario, you would apply Swiss VAT on 0.8% all transactions coming where the location of the person or entity who executed the transactions is not known. You will have to obtain such a ruling before applying such rate.
Is there Swiss VAT on donations or grants?
Swiss VAT is only applicable when there is a transfer of money for services. In the case of donations or grants, there is no services to be returned to giver of the funds therefore no VAT is applied.
Swiss flat rate VAT Scheme
There is a simplified VAT process known as the "Flat Rate Scheme" where businesses do not need to account for input VAT on their purchases. Under this scheme, businesses calculate their VAT liability based on a flat rate percentage applied to their total turnover, without considering input VAT deductions.
- Eligibility: The Flat Rate Scheme is available for businesses with an annual turnover below CHF 5,000,000. If your turnover exceeds this threshold, you would not qualify for the scheme.
- Flat Rate Percentage: The applicable flat rate percentage depends on the sector in which your business operates. The flat rate percentages range from 0.1% to 10% and are determined by the Federal Tax Administration (FTA) based on the sector's average VAT liability.
- VAT Calculation: Instead of calculating VAT based on actual sales and purchases, you apply the flat rate percentage to your total turnover. For example, if the flat rate percentage for your sector is 5%, your VAT liability would be 5% of your total turnover.
- Input VAT Deductions: Businesses under the Flat Rate Scheme do not account for input VAT on their purchases. Input VAT is not deducted or claimed on the VAT return since it is already factored into the flat rate percentage.
- Record-Keeping: It's still important to maintain proper records of your sales and purchases, as the FTA may perform occasional checks to ensure compliance with the Flat Rate Scheme. Keep invoices, receipts, and relevant documentation to support your turnover calculations.
- Reporting: Under the Flat Rate Scheme, businesses typically submit VAT returns on an semi-annual basis (twice a year). You report your total turnover and apply the flat rate percentage to calculate the VAT liability. The VAT return and payment must be submitted to the FTA within the specified deadline.
- Benefit: Using the flat rate scheme means you can charge 7.7% on all invoices and report a reduced rate to the authority. For example, if you're in consulting, you can charge 7.7% on your invoices and simply pay 5.9% in VAT to the authority meaning you get to keep 1.8% of additional revenue to your self.
It's important to note this scheme only makes sense if you have very low expenses as you cannot credit the input VAT and need to payout whatever the VAT rate on your turnover. To see what rates apply to which sectors, please visit the Swiss Government Federal website and scroll down to article 18. The rates vary from 0.1% to 6.5% depending on your sector.
It's always wise to do an analysis on whether a flat rate VAT scheme would work better for your business vs a traditional VAT scheme to see whether you can save money.
Reporting Swiss VAT on a cash basis vs accrual basis
There are some businesses that invoice customers but do not collect cash for multiple months. For these business to report VAT on an invoice basis would mean they would need to pay Swuss VAT when they don't have the cash in the bank. Therefore the Swiss government does allow you to report your Swiss VAT on a cash basis meaning you report VAT figures based on the cash you have received and not an invoices you have sent. If you wish to change your reporting method, from cash basis to accrual basis, you can do so but you need to reconcile your open invoices and pay this difference in the next Swiss VAT reporting cycle. Switching from an accrual based Swiss VAT reporting to a cash basis VAT reporting cycle is a little easier as the invoices all reconcile and zero out at the quarter therefore you a/re start from a clean slate.
How do I report Swiss VAT quarterly?
The easiest way to report Swiss VAT is to sign up to the Swiss Government Federal Portal. Here you create an account, click on Report VAT and click Register company/person. You will enter your company details and the authorities will send you a letter by post to your company's registered address in Zefix. You will receive an alphanumeric code in this letter. Once received, log back into the ePortal, click Redeem Registration Code and enter the code. Your company will be added to the ePortal and you're ready to start submitting your Swiss VAT reports quarterly online.
How can I adjust my Swiss VAT quarterly filing?
The Swiss authorities give companies the chance to file a 5th VAT return the following year to adjust any misfiled Swiss VAT throughout the 4 quarter of the previous year. For example, if you filed Q1, Q2, Q3 and Q4 VAT for 2022 and you made a mistake on one of the filings, you can file a 5th VAT return in 2023. The deadline to file this 5th VAT is August 25th 2023 or 240 days into the calendar year. This VAT return can be used to correct any previous filings. Please note however that submitting a 5th VAT declaration will result in paying 4% interest from October 15th, 2022 until the point where it was submitted as this is seen as way to delay paying VAT. If your 5th Swiss VAT declaration is a credit, meaning you get money back, then you don't accrue any 4% interest rate.
What if my financials are not done, should I file a 0 Swiss VAT return?
If you're financials are not prepared and the deadline to submit a Swiss VAT return is approaching, it is best to file 0 Swiss VAT return to avoid any penalties. You can always amend this filing in the next quarterly filing.
When is the deadline to submit a Swiss VAT return?
Swiss VAT is typically filed on a quarterly basis. The deadline to submit the VAT return on the quarter is 2 months after quarter end. For example if your Q1 2023 Swiss VAT return is due, you have until May 31st, 2023 to file this VAT return with the authorities to avoid any penalties.
What is the penalty for submitting a late Swiss VAT return?
Submitting a late Swiss VAT return will results a 4% interest rate starting from the deadline it was meant to be submitted.
Do I need an invoice for each Swiss input and output VAT claim?
Technically yes you do need an invoice for each transactions that is applicable to VAT. If you're trying to claim back input VAT, you need an invoice from the supplier highlighting the VAT rate. If you have 99% of your invoices and you are missing only a few invoices and you want to claim VAT on these, an auditor would likely be lenient and compassionate and forgo this wrong doing if you provide perhaps screen shots of your e-banking of the transactions and assume the VAT rate to be claimed back. In the end, it is recommend that you have an invoice for VAT applicable transactions although leniency will likely be giving by auditors if the majority of your invoices have been provided.
A reminder notice is not the same as a Swiss invoice
You need to ensure that you book only Swiss invoice for VAT into your accounting system. A reminder notice for payment is not a Swiss invoice and will be missing key information about VAT for which you technically cannot claim Swiss input VAT again. A reminder notice will clearly state reminder either in English, French or German and this would be a red flag to not book this into your accounting system but to find the invoice and book this one.
Be aware of 1 person contractors in Switzerland
If you receive an invoice which is paid to a person rather than a company which likely will not include VAT, this should be a red flag to check with the 1 person contractor to ensure he has the authority from the local kanton to operate as a person and receive income as a person rather than incorporate a Swiss entity. Should you not have this notice from the 1 person contractor, your company would be liable to pay social security contributions for the person back to the local kanton for the period you paid him and recoup these funds from the contractor at a later date.
Different Swiss input VAT for restaurants depending on takeout or dine in
Restaurant do have different VAT rates that they charge customers. If a customer asks for takeout, then they will charge the customer a VAT rate of 2.5%. If the customers requests to dine in, then they will charge the customer a VAT rate of 7.7%. This means you can claim back more VAT if you dine in restaurants rather than taking out your meal. Keep in mind that the restaurant VAT rate is inclusive in their price and therefore they are incentive to charge you for takeout as they get to keep 5.2% of the bill since they charge you a lower Swiss VAT rate of 2.5% rather than 7.7%.
My credit statements has transactions with Swiss input VAT, can I claim this input VAT?
You can claim back the input Swiss VAT on your credit card statements but you need an invoice or receipt associated to each transaction on the credit card statement. From a Swiss legal standpoint, you should anyways have an invoice or receipt associated to each transaction on your credit card statement to be fully compliant. If you are missing an invoice or receipt from your credit card statement, you should not look to claim back Swiss input VAT.
Invoices from Swiss authorities will be VAT exempt
Important to note that all invoices issued by Swiss authorities will be VAT exempt so you can book these as VAT free in your accounting system.
How can I get a Swiss VAT ruling?
To get a Swiss VAT ruling on a case which may not be clear whether you should apply VAT or not, you can simply write the Swiss VAT tax office and they will reply with a letter about your case giving you the clarity you need on whether Swiss VAT needs to be applied to the particular service or product you are offering.
Here's a general outline of the steps you might take:
- Contact the Tax Authority: Reach out to the Swiss tax authority responsible for VAT matters. In Switzerland, this is the Swiss Federal Tax Administration (FTA). You can find their contact information on the FTA's official website.
- Provide Information: Explain your situation in detail. Describe the transaction or scenario for which you need a VAT ruling. Provide all relevant information and documentation, such as contracts, agreements, invoices, and any other supporting documents.
- Submit a Formal Request: In some cases, the FTA might have a specific form or template for requesting a VAT tax ruling. If so, fill out the form with accurate and complete information. If there isn't a specific form, ensure your written request is clear and comprehensive.
- Wait for Response: The FTA will review your request and provide you with an official response. The response will include their interpretation of how the VAT rules apply to your situation. This could take some time, so be patient.
- Follow Up: If you haven't received a response within a reasonable time frame, consider following up with the FTA to inquire about the status of your request.
- Comply with the Ruling: Once you receive the VAT tax ruling, make sure to understand and implement its implications in your transactions or operations. If you disagree with the ruling, you might have options to appeal or seek further clarification from the tax authority.
Can I get a credit when submitting my Swiss VAT?
Yes, in Switzerland, you can generally claim a credit for the VAT you have paid on your business-related expenses when submitting your Swiss VAT return. This credit is often referred to as "input tax credit" or "input VAT credit." Here's how it generally works:
- Input VAT: When you purchase goods and services for your business operations, you will pay VAT on these expenses. This VAT is called "input VAT" because it's the VAT you've paid as part of your input costs.
- Output VAT: When you sell goods or services to your customers, you charge them VAT. This VAT is called "output VAT" because it's the VAT that your customers pay on the output of your business.
- VAT Liability Calculation: The difference between the output VAT collected from your customers and the input VAT you've paid on your expenses determines your VAT liability to the tax authority. If your output VAT is higher than your input VAT, you will owe the difference to the tax authority. If your input VAT is higher than your output VAT, you can claim a refund or carry forward the excess as a credit for future periods.
- VAT Return: You will need to file a regular VAT return with the Swiss tax authority, usually on a quarterly basis. In this return, you report your sales, purchases, and calculate the resulting VAT liability or credit.
- Claiming the Credit: If your input VAT exceeds your output VAT for the period, you can claim a credit for the excess input VAT. This credit can be used to offset future VAT liabilities. If the credit is substantial, you may be eligible for a refund, which will depend on the specific regulations and thresholds in place.
How do I book Swiss VAT in my accounting system?
When booking Swiss VAT in your accounting system, you generally follow these steps:
- Create VAT Accounts: Set up separate accounts in your chart of accounts to track VAT transactions. Typically, you'll need to create accounts for Output VAT (VAT charged on sales), Input VAT (VAT paid on purchases), and possibly VAT Payable or VAT Receivable accounts to track the balance of VAT owed or due.
- Record Sales: When recording sales transactions, ensure that the VAT amount charged to your customers is correctly calculated and assigned to the Output VAT account. Depending on your accounting system, you may need to use specific tax codes or tax rates associated with the applicable VAT rates.
- Record Purchases: When recording purchase transactions, assign the VAT amount paid on your purchases to the Input VAT account. Ensure that you have supporting documentation such as supplier invoices or receipts to substantiate the VAT paid.
- Determine VAT Liability or Refund: Calculate the difference between the Output VAT and Input VAT. If the Output VAT exceeds the Input VAT, you have a VAT liability, and the amount is owed to the tax authorities. If the Input VAT exceeds the Output VAT, you have a VAT refund, and you may be eligible to receive a refund of the excess VAT paid.
- Record VAT Payments or Refunds: When making VAT payments to the tax authorities or receiving VAT refunds, record these transactions in your accounting system. Assign them to the appropriate VAT Payable or VAT Receivable accounts.
- VAT Reporting: Based on the reporting frequency (quarterly or annually), compile the necessary information from your accounting system to complete your VAT return. Use the data from the Output VAT and Input VAT accounts to report the VAT amounts on your return accurately.
- Reconcile VAT Accounts: Regularly reconcile your VAT accounts to ensure that the balances align with the amounts reported on your VAT return. Investigate and resolve any discrepancies.
To better understand how to manage Swiss VAT in your accounting please read our article A Step-by-Step Guide to Setting Up Swiss VAT on Xero Accounting. This is relevant also for companies who are not using Xero accounting system.
Why some tax experts interpret Swiss VAT differently?
Different interpretations of Swiss VAT can occur for several reasons:
- Complexity of Regulations: VAT regulations can be complex and subject to interpretation. The Swiss VAT Act and its accompanying ordinances provide guidelines, but specific scenarios or transactions may have ambiguous or unclear provisions. This can lead to different interpretations among individuals or tax professionals.
- Case Law and Precedents: Interpretations of VAT can also be influenced by case law and precedents set by courts or tax authorities. As new cases arise and are adjudicated, interpretations may evolve or be refined. Differences in interpretations can arise when different authorities or courts have issued conflicting decisions or when there is a lack of clear precedents for specific situations.
- Diverse Perspectives: Different individuals or entities may have different perspectives and backgrounds that shape their interpretations. Factors such as their knowledge of VAT regulations, their professional expertise, and their specific interests or biases can influence how they interpret and apply the rules.
- Individual Circumstances: Interpretations may also vary based on the specific circumstances of a business or transaction. Factors such as the nature of the goods or services, the industry sector, cross-border activities, and contractual arrangements can introduce complexities that may lead to different interpretations among stakeholders.
To ensure accurate interpretation and compliance with Swiss VAT, it is advisable to consult qualified tax professionals, seek guidance from relevant authorities, and stay updated with the latest regulations and interpretations in the field.