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Details on Site Contribution
 
Site contribution
Date: September 2016
Prepared by:
Dr. Monika Molnár, LL.M. Taxation, Tax Partner
MME Legal | Tax | Compliance
Gubelstrasse 11
6302 Zug
Phone:   +41 41 726 99 66
Fax:   +41 41 726 99 60
E-Mail:   monika.molnar@mme.ch
Value-added tax (VAT), local names: Mehrwertsteuer (MWST), Taxe sur la valeur ajoutée (TVA), Imposta sul valore aggiunto (IVA)
VAT Law was introduced as per 1 January 1995.
Federal Swiss VAT Authority : www.estv.admin.ch -> Mehrwertsteuer
1. Introduction
Current VAT rates are:
  • Standard 8%
  • Reduced and special 2.5% (e.g. food, newspaper) and 3.8% (hotel accommodation)
  • other zero-rated (e.g. export) and exempt (without the right to deduct input VAT)
    Valid format of the Swiss VAT number
    CHE-123.456.789 MWST
    Swiss VAT return periods
    quarterly; half-yearly (if the taxable person has applied to be taxed under the balance tax rate method); monthly (optional if excess of input over output VAT occurs regularly)
    Thresholds
    CHF 100,000; however, for enterprises with turnover below CHF100,000 p.a. a voluntary VAT registration may apply in order to benefit from the input VAT deduction, if applicable:
    https://www.estv.admin.ch/estv/de/home/mehrwertsteuer/themen/steuerpflicht/leistungen-durch-auslaendische-unternehmen.html
    VAT refund
    There is a possibility to recover the Swiss VAT incurred by non-established businesses (without having a Swiss VAT registration) based on the reciprocity rule, https://www.estv.admin.ch/estv/de/home/mehrwertsteuer/themen/vat-refund---tax-free/vat-refund_ausland.html
    What is VATable?
    Swiss VAT applies for the following transactions:
    1.  The supply of goods or services made in Switzerland for consideration by a taxable person.
    2.  The receipt of reverse-charge services or, in some cases, goods by any person in Switzerland who purchases the items from an entity that is established outside Switzerland and that is not registered for VAT in Switzerland (services and goods for which the recipient is liable for the VAT due). Services and goods purchased by non-taxable persons are not subject to the reverse charge if the amount due to the foreign supplier does not exceed CHF10,000 per calendar year.
    3.  The importation of goods from outside Switzerland and Liechtenstein, regardless of the status of the importer. Liechtenstein is considered to be domestic territory for Swiss VAT purposes. Likewise, Switzerland is considered to be part of the territory of Liechtenstein for the purposes of VAT in Liechtenstein (Zollunion).
    Who is a VATable person? Who is liable for VAT?
    A taxable person is any person who, regardless of the legal form, purpose or result, carries out a business in Switzerland. Carrying out the business involves the independent exercising of professional or commercial activities together with the intention to execute regular transactions and acting externally under its own name.
    Possibility for a Swiss VAT group registration
    Legal persons with their seat in Switzerland or commercial units in Switzerland can form a VAT group if they are related as a result of "joint uniform control." The group may include Swiss branches of foreign entities, to the extent that the foreign entities are under the same "joint supervision" as the other VAT group members. Although Liechtenstein is considered to be domestic territory for Swiss VAT purposes (and vice versa), it is not possible to form a VAT group that includes both Swiss and Liechtenstein entities. Effective as per 1 January 2015, a pension fund may once again become a member of a VAT group. The tax group must appoint a tax representative who will deal with the VAT-related proceedings of the group. The minimum period for which the tax group can exist is one year. VAT group members are treated as a single taxable person with a single VAT number.
    The following are the significant aspects of grouping:
  • The VAT group submits a single, consolidated VAT return for all of its members.
  • VAT is not chargeable on transactions between group members.
  • All VAT group members are jointly and severally liable for the group's VAT liabilities.
    Definition of a "non-established business"
    A "non-established business" is a business that does not have a legal seat or fixed establishment in the territory of Switzerland. A non-established business that makes supplies of goods or services in Switzerland must register for VAT if it is liable to account for Swiss VAT on the supplies.
    Effective as per 1 January 2015, foreign companies are liable for VAT in Switzerland if they provide domestic supplies subject to the reverse charge, and the revenue generated from the supplies exceeds CHF100,000 per year.
    Formalities for the Swiss VAT registration of a non-established business
  • Tax representatives: A non-established business must appoint a tax representative if it supplies goods or services subject to Swiss VAT.
  • Bank guarantee is needed for the VAT registration.
    Reverse charge
    The "reverse charge" is a form of self-assessment for VAT through which the recipient accounts for the tax. The reverse-charge mechanism applies to the following situations: These exceptions, for which additional consideration regarding the place-of-supply rules needs to be made, include the following:
    1. Services that require the physical presence of the customer, who is a natural person, at the place where these services are provided (for example, beauty or curative therapies and treatments, family advisory and child care), even if exceptionally supplied from a distance
    2. Services of travel agents and event organizers
    3. Services in the fields of culture, art, sport, science, education or entertainment, and similar services including the activities of organizers and related activities
    4. Restaurant services
    5. Passenger transport services
    6. Services related to immovable property (for example, intermediation, administration, valuation, services in connection with the preparation and coordination of construction works such as architectural, engineering and supervising services and land and building monitoring, and accommodation services)
    7. Services in the field of international development and humanitarian aid
    Furthermore, there is a rule providing that the place of supply is the domicile of the recipient concerning supplies of electricity power or natural gasoline in pipes, even though those supplies are treated as supplies of goods and not services. The reverse-charge mechanism applies to electronic services, supplies of electricity power or natural gasoline in pipes and telecommunication services only if the Swiss service recipient is a VAT-registered business. Consequently, foreign businesses that provide electronic supplies of services to persons who are not registered for VAT must register for VAT in Switzerland and charge Swiss VAT if their turnover in Switzerland exceeds the annual threshold of CHF100,000. For all other services, the reverse-charge mechanism applies regardless of whether the recipient of the services is registered for VAT.
    Registration procedures
    Businesses that intend to register for Swiss VAT need to file an application with the Swiss Federal VAT Authority. The application must be filed electronically via the Swiss Federal VAT Authority webpage, available in German, French and Italian at http://www.estv.admin.ch/mwst/dienstleistungen/00229/00591/.
    On average, the application procedure takes about two weeks.
    Late-registration penalties
    Taxable persons should be registered with the Federal Tax Administration in writing within 30 days after the commencement of their tax liability or 60 days for persons who become taxable solely because of the acquisition tax. A penalty may be levied for late VAT registration. In the case of tax evasion, fines of up to CHF 800,000 may be charged. The amount of the fine varies depending on the circumstances.
    Digital supply
    Foreign businesses that provide electronic supplies of services to persons who are not registered for VAT must register for VAT in Switzerland and charge Swiss VAT if their turnover in Switzerland exceeds the annual threshold of CHF100,000. For electronically supplied services to recipients registered for Swiss VAT, the reverse charge mechanism applies provided that the supplier is established outside of Switzerland and not registered for Swiss VAT.
    Deregistration
    Taxable persons are required to notify the Swiss Federal VAT Authority in writing within 30 days after ceasing their entrepreneurial activities in Switzerland or with concluding the liquidation procedure at the latest.
    2. VAT Rates
    The term "taxable supplies" refers to supplies of goods and services that are liable to VAT at any rate. The VAT rates are:
  • Standard rate: 8%
  • Reduced rate: 2.5%
  • Special rate of 3.8% (for hotel accommodation)
    The standard VAT rate applies to all supplies of goods or services, unless a specific measure provides for a reduced rate or an exemption.
    Examples of goods and services taxable at 2.5%
  • Books, newspapers and magazines
  • Food and drinks (except provided by hotels and restaurants)
  • Drugs
  • Water in pipes
    Examples of goods and services taxable at 3.8%
  • Hotel accommodation, including breakfast
    The term "tax-exempt without credit" refers to supplies of goods and services that are not liable to tax and that do not give rise to a right of input tax deduction. Some supplies are classified as tax exempt with credit (zero-rated e.g. export), which means that no VAT is chargeable, but the supplier may recover the related input tax.
    Examples of tax-exempt without credit supplies
  • Healthcare (in some cases; unless opted for taxation)
  • Financial transactions
  • Insurance
  • Education (unless opted for taxation)
  • Real estate (unless opted for taxation)
    Examples of tax-exempt with credit supplies
  • Exports of goods and services
  • Supplies of certain goods and services to airlines
  • Services with the place of supply abroad
    Option to tax for exempt supplies
    Certain supplies of goods and services may be voluntarily subjected to tax by openly charging VAT (option), e.g., certain healthcare, educational and cultural services as well as renting or leasing of immovable property. However, restrictions may apply and the right to opt should be reviewed on a by-case basis.
    3. VAT Refund
    Recovery of VAT by non-established businesses
    Switzerland refunds VAT incurred by businesses that are neither established nor registered for VAT in Switzerland or Liechtenstein. Non-established businesses may generally claim Swiss VAT to the same extent as Swiss VAT-registered businesses. However, restrictions apply to certain types of expenditure for claimants established in certain countries. Refunds are made on the condition of reciprocity. Repayments are currently made to claimants from the following countries:
    https://www.estv.admin.ch/estv/en/home/mehrwertsteuer/themen/vat-refund---tax-free/vat-refund.html => 1224_01 liste des Pays
    VAT refund application
    The deadline for refund claims is 30 June following the calendar year in which the supply received was invoiced. This deadline is strictly enforced.
    Claims may be submitted in French, German or Italian. The claimant must appoint a representative who is a natural person or a legal entity whose domicile or registered office is in Switzerland.
    The claim period is one year. The minimum claim amount is CHF 500. The following documentation must accompany the claim (the forms indicated below are available for download at the website of the Swiss VAT authorities):
  • Completed VAT refund claim (Forms 1222 and 1223). Form 1222 identifies the Swiss tax representative that needs to be appointed to apply for the refund.
  • Original VAT invoices.
  • Proof of payment (if requested by the Swiss tax authorities).
  • A Certificate of Taxable Status for the claimant, which is issued by the competent tax authorities in the country where the claimant is established, to prove the business status of the claimant.
    Applications for refunds of Swiss VAT may be sent to the following address
    Eidgenoessische Steuerverwaltung
    Hauptabteilung Mehrwertsteuer
    Schwarztorstrasse 50
    CH-3003 Berne
    Switzerland
    The repayment interest
    Refunds are generally made within six months after the date of application. However, the Swiss VAT authorities pay interest on refunds made after this period if reciprocity rules are observed.
    4. Invoicing
    A Swiss taxable person must generally provide a VAT invoice for all taxable supplies made, including exports. A VAT invoice is necessary to support a refund under the VAT refund scheme for non-established businesses. A VAT credit or debit note may be used to correct the VAT charged and reclaimed on a supply of goods or services. These documents must be cross-referenced to the original VAT invoice.
    Proof of exports (zero-rated with the right to deduct input VAT)
    Swiss VAT is not chargeable on supplies of exported goods. However, to qualify as VAT-free, export supplies must be supported by evidence that the goods have left Switzerland. Acceptable proof includes the officially validated customs documentation.
    Invoices in foreign currency
    If a Swiss VAT invoice is issued in a currency other than Swiss francs (CHF), the amounts must be converted to Swiss francs, using the appropriate exchange rates published by the Swiss Federal VAT Authority, which are available on its website (monthly or daily rates are available). If no clear tax advantage is gained, the use of a group exchange rate may be allowed.
    5. VAT Compliance
    Swiss VAT returns are usually submitted for quarterly periods. If the taxable person has applied to be taxed under the balance tax rate method (that is, the tax due is calculated by multiplying the gross total taxable turnover by the balance tax rate authorized by the Swiss tax authorities), VAT returns must be submitted on a half-yearly basis. Taxable persons with a regular excess of input over output VAT may apply to submit monthly returns. The VAT return is due, together with full payment, 60 days after the end of the VAT settlement period. VAT liabilities must be paid in CHF.
    Two special schemes involve calculating VAT due in a different manner.
  • Net tax rate scheme. If a taxable person does not generate more than CHF 5.020 million turnover from taxable supplies annually and in the same period does not have to pay more than CHF 109,000 in VAT, calculated at the net tax rate that applies to him, he may report VAT under the net tax rate method. When using the net tax rate method, the VAT due is determined by multiplying the total of the taxable considerations, including tax, generated in the reporting period in Switzerland by the net tax rate approved by the Swiss Federal Tax Authorities. The net tax rates take into account the input tax amounts usual in the relevant branch of the industry. They are fixed by the Swiss Federal Tax Authorities after consultation with the industry association concerned. Authorization to report under the net tax rate method must be requested from the Swiss Federal Tax Authorities and the method must be used for at least one tax period.
  • Flat tax rate scheme. In principle, the flat tax rate method is similar to the net tax rate method, but may be applied only by public authorities and related institutions, in particular private hospitals and schools or licensed transport undertakings and associations and foundations.
    Electronic filing and archiving
    Data and information transmitted and stored electronically or in a similar manner that are relevant for claiming input tax, or levying or collecting tax, have the same evidential value as data and information that are readable without auxiliary means, provided the following requirements are met:
  • Proof of origin
  • Proof of integrity
  • Dispatch cannot be contested
    Special legal provisions that require the transmission or storage of the data and information mentioned in a particular form are in place.
    Annual returns
    There is no requirement to file an additional annual return in Switzerland. However, if the taxable person discovers errors in his tax returns in the course of drawing up his annual accounts, he must correct them at the latest in the return for the reporting period within the 180th day after the end of the relevant business year.
    Penalties
    Interest at a rate of 4.5% a year may be assessed for late payment of VAT. Penalties may be also assessed for the late submission of a VAT return.