VAT Rate Switzerland and Compliance 2023
Although part of the Single Market, Switzerland is not part of the European Union and therefore not subject to the EU VAT Directive. This means it's entirely free to set its own VAT rates without any restrictions. If you're doing business in Switzerland, you'll need to be familiar with the country's VAT rates and VAT compliance regulations.
In this post, we'll look at Swiss VAT rates, registration procedures for foreign companies, compliance and invoicing rules, changes and updates to Switzerland VAT regulations, and more.
- Once the VAT registration threshold is reached, foreign businesses must register for VAT in Switzerland to remain compliant with Swiss regulations.
- Adherence to best practices, including invoicing guidelines, record keeping, and reporting requirements, is necessary for compliance.
- Businesses should be aware of planned increases in the standard & reduced VAT rates by January 2024 and the transition to the ePortal platform in November 2022.
Swiss VAT rates explained
Switzerland’s value-added tax (VAT) system is essential for businesses operating in the country. The Swiss VAT rates are structured in a way that caters to specific goods and services, which are subject to different VAT rates. Gaining a comprehensive understanding of these VAT rates and properly filing vat returns will help you manage your tax liabilities and ensure compliance with Swiss tax authorities.
This section will explore the standard VAT rate, reduced VAT rates, exemptions, and special cases. Knowing these rates and their applicability will help you navigate the Swiss VAT landscape efficiently and effectively.
Standard VAT rate
The standard VAT rate in Switzerland is 7.7%, which applies to most goods and services. This rate is a critical component of the country’s tax system and determines the tax liability for businesses operating within its borders. Understanding the standard VAT rate and how it applies to your business transactions is crucial for accurate tax reporting and compliance.
It's important to note that the standard VAT rate is subject to change. In recent years, there have been discussions about increasing the rate to 8.1% by January 2024. Businesses should monitor potential changes in the standard VAT rate and adjust their pricing and accounting practices accordingly.
Reduced VAT rates
In addition to the standard VAT rate, Switzerland also has reduced VAT rates for specific goods and services. The reduced rate of 3.7% applies to hotel services, whereas the 2.5% rate applies to certain consumer goods, such as food, books, and medicines. This lower rate aims to make essential goods more affordable for consumers.
Businesses that supply goods and services subject to reduced VAT rates must be aware of these rates and apply them correctly when invoicing their customers. Failure to do so may result in penalties and fines from the Swiss tax authorities, especially when it’s time to submit VAT returns.
By understanding and applying the correct reduced VAT rates, businesses can maintain compliance with Swiss VAT regulations and provide their customers with accurate pricing.
Exemptions and special cases
Switzerland also has exemptions and special cases for certain goods and services. For example, healthcare and education services are exempt from Switzerland VAT. These exemptions exist to reduce the tax burden on essential services and support the social welfare of the Swiss population.
Companies providing exempt goods and services should be aware of these exemptions and ensure that they're not charging VAT on these transactions.
VAT registration process for foreign companies
Foreign companies looking to conduct business in Switzerland must adhere to the country’s VAT regulations, including registering for VAT when necessary. This process involves understanding the thresholds and requirements, appointing a fiscal representative, and completing the online registration with the necessary documentation.
In this section, we'll provide an overview of the VAT registration process for foreign companies. We'll also delve into the specifics of thresholds, fiscal representation, and online registration, ensuring that your business successfully navigates the Switzerland VAT landscape.
Thresholds and requirements
Foreign companies operating in Switzerland are required to register for Swiss VAT if their worldwide turnover exceeds CHF 100,000 per annum (not just Swiss turnover). This threshold determines whether a company needs to register for VAT in Switzerland, so it's essential for foreign businesses to assess their annual turnover and determine if they meet the registration threshold.
Companies that meet the threshold must register for VAT within 30 days of the requirement arising. Failure to register for Swiss VAT within this timeframe can result in fines and penalties. By being aware of the thresholds and requirements for VAT registration in Switzerland, foreign companies can ensure compliance and avoid potential financial pitfalls.
In some instances where Place of Supply of Service rules apply, there is no need to register for VAT.
Non-Swiss businesses are required to appoint a fiscal representative to handle VAT compliance and communication with Swiss tax authorities. The fiscal representative’s role includes assisting the business in adhering to Swiss VAT law and responding to any queries they may have regarding their VAT responsibilities in Switzerland.
To appoint a fiscal representative, taxable persons must grant power of attorney to their chosen representative using a form provided by the Federal Tax Administration, signed by both the business and the representative.
Online registration and documentation
Once a fiscal representative has been appointed, foreign businesses must complete the online registration process for Swiss VAT. This involves completing a questionnaire and providing financial security, such as a bank guarantee or cash deposit.
A bank guarantee issued by a Swiss-domiciled bank or a Swiss branch of a foreign bank, or a cash deposit with the Federal Tax Administration, can provide financial security. Such measures provide assurance and stability in terms of managing financial resources. Providing financial security is the final step in the VAT registration process for foreign businesses in Switzerland, ensuring that they meet the necessary requirements and are compliant with Switzerland VAT regulations.
Swiss VAT compliance and invoicing rules
Swiss VAT compliance involves adhering to specific invoicing guidelines, maintaining accurate records, and understanding tax point rules for VAT payments. Ensuring compliance with these rules is crucial for businesses operating in Switzerland, as failure to do so may result in penalties, fines, or other legal consequences.
In this section, we'll explore the invoicing guidelines, record-keeping and reporting requirements, and tax point rules that are essential for Swiss VAT compliance.
Invoices for Swiss VAT must include specific elements stipulated in Article 26 of the Swiss VAT Act. These elements include the name and address of the supplier, their VAT number, and the name and address of the recipient. Invoices must also adhere to Switzerland VAT requirements, such as displaying the Swiss VAT number and providing clear and concise information about the goods or services being invoiced.
By following these invoicing guidelines, businesses can ensure compliance with Swiss VAT regulations and provide their customers with accurate and transparent pricing information.
Record keeping and reporting
Swiss VAT compliance requires businesses to maintain accurate records of all transactions for a period of 10 years. These records must be verifiable and complete, ensuring that the business can provide accurate information to Swiss tax authorities when required.
Businesses must also report their VAT transactions on a monthly or quarterly basis, depending on the size and nature of their operations.
Tax point rules
Tax point rules in Switzerland determine when VAT is due, based on the time of delivery or service completion. These rules establish the tax point as either upon invoicing or with the collection of the consideration if conducted within Switzerland.
There are certain exceptions to these rules, such as when the customer is a non-resident of Switzerland, in which case the tax point is the date of delivery or service completion.
Non-compliance with tax point rules may result in penalties and fines. To avoid these consequences, businesses should familiarize themselves with Swiss tax point rules and ensure that they are correctly applying them when calculating and reporting their VAT transactions.
Changes and updates to Swiss VAT regulations
Swiss VAT regulations are always subject to change, and businesses operating in Switzerland must stay informed of any changes or updates.
Potential VAT rate increase
In January 2024, there is a planned increase of the standard VAT rate from 7.7% to 8.1%, while the reduced rate may rise from 2.5% to 2.6%. These changes would require businesses to adjust their pricing and accounting practices accordingly.
By staying informed of potential VAT rate increases, businesses can adapt their practices in a timely manner, ensuring continued compliance with Switzerland VAT regulations and minimizing the impact of these changes on their operations.
Transition to ePortal
The Swiss Federal Tax Administration launched a new e-filing portal called 'ePortal' in November 2022, replacing the existing 'ESTV SuisseTax' platform. This new platform aims to centralize tax-related processes, enhance the accuracy and efficiency of tax filing, and provide businesses with real-time access to tax information.
To facilitate a smooth transition to ePortal, businesses should register for VAT as soon as possible, familiarize themselves with the new platform, and take advantage of any available VAT recovery opportunities. By doing so, businesses can maintain compliance with Swiss VAT regulations and benefit from the advantages offered by the ePortal system.
also positions businesses to take advantage of any VAT recovery opportunities available to them in Switzerland.
VAT recovery opportunities
Non-resident companies operating in Switzerland may have the opportunity to recover all or part of the VAT incurred on their expenses. By claiming VAT refunds on costs incurred in Switzerland and submitting a vat return to the Swiss tax authorities, businesses can potentially save money.
To take advantage of VAT recovery opportunities, businesses should consult with a tax professional and explore their options for VAT recovery in Switzerland. To be granted a VAT refund, your business must be registered in a country that has a reciprocal VAT refund agreement with Switzerland. All EU countries can claim back VAT from Switzerland.
By gaining a comprehensive understanding of Swiss VAT rates, registration processes, compliance rules, and potential changes to the regulations, businesses can ensure compliance and avoid potential penalties. And by following best practices and exploring VAT recovery opportunities, businesses can maximize their success and financial benefits in the Swiss market.
Do you need help with your VAT compliance? Book a free call with one of our VAT experts to find bespoke solutions for your business, optimize your VAT costs, and reach millions of new potential customers.
Frequently Asked Questions
What is the VAT rate in Switzerland 2023?
The standard VAT rate in Switzerland is currently 7.7%. This rate will apply to services provided before January 2024, when the rate is projected to change to 8.1%.
Hotels have a reduced VAT rate of 3.7% and foodstuffs, books, and medicines have a further reduced rate of 2.5%. The 2.5% rate is expected to be raised to 2.6% in January 2024.
Is Switzerland in the EU VAT?
Switzerland is not a part of the European Union (EU) and therefore does not have VAT laws that are part of the EU system. Although the Swiss Value Added Tax (VAT) system is similar to the EU VAT, it operates independently.
How do I register my foreign company for VAT in Switzerland?
To register your foreign company for VAT in Switzerland, you must determine if you meet the registration threshold, appoint a fiscal representative, and complete the online registration process.
What are the invoicing requirements for Swiss VAT?
Switzerland VAT invoices must contain the supplier’s and recipient’s name and address, as well as the supplier’s VAT number, as stipulated in Article 26 of the Swiss VAT Act.