VAT in Switzerland in 2024 and 2025

The Value Added Tax (VAT) in Switzerland is a consumption tax paid by the final consumer. Applied at each stage of the production and distribution of goods and services, VAT allows companies to recover the tax paid on their professional purchases by deducting it from the VAT collected on their sales.

In Switzerland, services provided abroad are not subject to Swiss VAT, allowing only consumption within the national territory to be taxed. However, upon importation, VAT is levied, and Swiss companies often have to pay VAT on services purchased from foreign companies in accordance with Article 45 of the Federal Law on Value Added Tax (LTVA).

As of January 1, 2024, new VAT rates came into effect: 8.1% for the standard rate, 2.6% for the reduced rate, and 3.8% for accommodation services. It is crucial for companies to consider these rates when invoicing services that span the transition period between 2023 and 2024, as the applicable rates will depend on the period in which the services or deliveries are performed.

Some transactions benefit from VAT exemptions, including medical, educational services, insurance and banking services, as well as certain agricultural activities. Companies can also choose to voluntarily subject themselves to VAT, even if their turnover does not exceed the required threshold, allowing them to recover the VAT paid on their purchases.

VAT in Switzerland is a complex but essential mechanism that directly impacts business management. A good understanding of the current rates and exemption rules is essential to ensure compliance and optimize financial operations.

VAT Number in Switzerland

The VAT number in Switzerland is structured as follows: CHE, followed by nine digits, and ending with “VAT”, taking the form: CHE-xxx.xxx.xxx VAT. This number is essential for all interactions with the tax authorities and is assigned upon confirmation of VAT registration.

In Switzerland, companies are required to register for VAT if their annual turnover exceeds 100,000 CHF. This also includes foreign companies providing services in Switzerland, unless their services are exclusively exempt from VAT. Companies below this threshold can opt for voluntary registration to recover the VAT paid on their purchases.

VAT Registration in Switzerland

VAT registration can be done online, via a procedure optimized for modern browsers. The process uses advanced web technologies for instant validation of information. Data is automatically saved at each step, allowing for retrieval during subsequent sessions. Companies must prepare all necessary documents, such as the extract from the commercial register and the IDE number, before starting the registration.

VAT Calculation Methods in Switzerland

Effective Counting Method:

The effective counting method, defined in Article 36 of the Swiss VAT Act (LTVA), is generally applied quarterly. This method calculates the VAT due by subtracting the VAT paid (on purchases, imports, and other taxable acquisitions) from the VAT collected on sales in Switzerland. Thus, only the net amount of VAT is paid to the tax authorities, ensuring fair tax contribution.

Counting Method according to Net Debt Tax Rates:

The method governed by Articles 37 of the LTVA and 77 to 96 of the VAT Ordinance (OTVA) is designed for small and medium-sized enterprises (SMEs). It uses specific rates per sector of activity to calculate the VAT due on total turnover, including VAT collected. This method simplifies administrative procedures by avoiding detailed calculation of VAT on purchases. In addition, VAT declarations under this method are only required semi-annually, thus reducing administrative burden.

Counting Method according to Flat Rates:

Applying mainly to autonomous entities of public services, schools, private hospitals, associations, and foundations, this method, governed by Article 37, paragraph 5 of the LTVA and Articles 97 to 100 of the OTVA, uses specific rates to simplify accounting. Total turnover, including VAT, is multiplied by the flat rate to determine the tax due. Declarations are required semi-annually, facilitating administrative management.

VAT in Switzerland is a crucial fiscal system for businesses, requiring a good understanding of the various counting methods and legal obligations to ensure optimal compliance and efficient management.

VAT Counting Periodicity and Submission Deadlines in Switzerland

In 2024, VAT declarations in Switzerland can be submitted monthly, quarterly, or semi-annually. However, as of January 1, 2025, a legislative revision will also allow for annual declaration under certain conditions, especially for small and medium-sized enterprises (SMEs) that meet a turnover threshold and demonstrate exemplary tax compliance.

Currently, companies using the net debt tax rate method can opt for semi-annual declaration, while those using the effective method must declare quarterly. These declarations must be submitted within 60 days following the end of the corresponding declaration period.

The payment of declared VAT must be made within 60 days following the end of the declaration period, in accordance with Article 86, paragraph 1, of the LTVA. In case of difficulty in meeting this deadline, an extension may be requested, although this does not affect the legal payment deadline. Delays will result in automatic late payment interest.

Specific Deadlines for Submission of VAT Declarations and Payments

The deadlines for submission and payment of VAT declarations vary according to the accounting period:

– 1st quarter: submission and payment by May 30.

– 2nd quarter and 1st semester: deadline on August 30.

– 3rd quarter: finalization by November 30.

– 4th quarter and 2nd semester: declarations and payments by February 28 or 29, depending on the year.

New Declaration Options from 2025

As of January 1, 2025, companies registered for VAT in Switzerland will have the option to choose from several declaration frequencies: monthly, quarterly, semi-annually, or annually. This revision aims to simplify tax obligations and reduce administrative burdens, especially for SMEs.

Companies opting for annual declaration must meet certain criteria, including taxable turnover not exceeding 5,005,000 CHF and a flawless tax compliance history over the past three years. They must also make advance VAT payments, adjusted during the annual declaration. Overpayments will be refunded, and interest may be applied for late or insufficient payments.

Changes in Tax Representation and Liability

The new rules also include modifications concerning tax representation and liability. For example, Swiss directors and managers may be jointly liable for VAT debts, and tax authorities may require guarantees in certain cases. Foreign companies will no longer need a tax representative in Switzerland under certain conditions.

VAT Counting Methods in Switzerland

There are two main methods for VAT counting in Switzerland:

Counting according to agreed considerations (Art. 39, para. 1, LTVA):

Companies declare income and deduct VAT paid based on invoices issued and received during the counting period.

Counting according to considerations received (Art. 39, para. 2, LTVA):

VAT is due when payment is effectively received for goods or services provided, and VAT paid deduction also occurs at the time of payment. This method requires authorization from the Federal Tax Administration (AFC) and must be maintained for at least one fiscal year.

These revisions and options offer companies greater flexibility in managing their VAT   obligations, simplifying administrative processes and improving cash flow management. Switzerland’s continued efforts to comply with international standards make its VAT system more efficient and adaptable.

Prepaid Tax in Switzerland

Prepaid tax (PT) in Switzerland, as part of VAT, allows companies to deduct the VAT they have paid on their professional purchases from the VAT amounts they have collected on their sales. This deduction is possible because VAT is a consumption tax, not a tax on businesses. Thus, companies act as intermediaries, collecting VAT from their customers and remitting it to the state while recovering the VAT paid on their own professional expenses.

In practice, this means that when a company purchases goods or services for which it pays VAT, this tax (prepaid tax, or PT) can be deducted from the VAT it owes on its sales. If the VAT paid on purchases exceeds the VAT collected on sales during a given period, the company can request a refund of the difference from the tax authorities. This system aims to tax only the value added at each stage of production and distribution, rather than the total turnover of the company.

Corrections to Prepaid Tax

The revision of rules concerning self-supply and private shares in Switzerland requires special attention for VAT declarations, both for self-employed individuals and legal entities.

For self-employed individuals:

They must adjust the prepaid tax, i.e., the VAT initially deducted for professional expenses that are subsequently used for private purposes. This correction must be reported under item 415 of the VAT declaration. This must be done at least once a year to reflect the personal use of goods or services initially declared as business expenses.

For legal entities:

Companies must declare the portion of expenses used for private purposes as income under item 415 of their VAT declaration. This income is estimated based on the private use of goods or services by the directors or employees of the company. As with self-employed individuals, this declaration must be made at least annually.

These rules ensure that VAT is correctly calculated and paid on actual consumption, whether professional or personal, and help maintain a clear separation between business expenses and personal use, in accordance with tax obligations.

Subsequent Relief of Prepaid Tax in Switzerland

In Switzerland, subsequent relief of prepaid tax is a process allowing companies to adjust VAT deductions they could not claim initially upon receipt of a service, often because they were not yet subject to VAT at the time of purchase. This is governed by Article 32 of the VAT Act (LTVA).

Conditions for making a relief:

Proof of modification of use or tax status:

The company must demonstrate that the conditions for VAT deduction became applicable after the initial purchase. For example, this may concern goods or services used differently from what was initially planned or in a context where the company becomes subject to VAT after acquiring goods or services.

Appropriate documentation:

The relief must be properly documented and justified in the VAT declarations. Companies must include specific details in their VAT declaration under item 410, accompanied by all relevant detailed statements and documents.

Availability and current value of goods/services:

For the correction to be accepted, the goods or services must still be available and possess a current value at the time the conditions for deduction are met.

It is also important to note that for certain services, such as consultancy or management, there is a legal presumption that these services are considered consumed immediately after purchase and therefore generally not eligible for subsequent relief unless proven otherwise.

These mechanisms of prepaid tax and associated corrections ensure precise and fair application of VAT in Switzerland, allowing companies to maintain efficient tax management while complying with regulations in force. Companies must ensure rigorous documentation and clear understanding of applicable conditions to optimize their VAT obligations and rights.

Archiving of Accounting Documents in Switzerland: Legal Requirements and Durations

Accounting documents, such as books, receipts, management and audit reports, as well as annual accounts including the balance sheet, income statement, and annexes, must be archived for a period of ten years, in accordance with Article 958f, paragraph 1, of the Swiss Code of Obligations (CO).

Management and audit reports must be kept in written form and signed by the responsible parties. These documents, as well as accounting books and records, can be archived in paper, electronic, or any other format ensuring reliable access and readability of content under all circumstances.

For commercial documents related to real estate, the law requires a retention period of 20 years. This includes supplier invoices, VAT statements, purchase contracts, construction cost breakdowns, and construction plans, as stipulated by Article 70, paragraph 3 referring to Article 42 of the VAT Act (LTVA).

Foreign Companies and VAT in Switzerland

International companies must register for VAT in Switzerland when providing services on Swiss territory and achieve a worldwide taxable turnover of at least 100,000 francs. Non-profit sports and cultural associations as well as non-profit public utility institutions benefit from a raised threshold of 250,000 francs. Swiss territory for VAT purposes also includes the Principality of Liechtenstein, the municipality of Büsingen in Germany, and the Swiss part of Basel-Mulhouse airport.

The obligation to register for VAT begins from the first taxable service provided in Switzerland. For advance payments, the registration obligation starts from the date of invoicing or, in the absence of an invoice, upon receipt of payment.

Taxable Services in Switzerland

Certain services are considered deliveries and are therefore subject to VAT in Switzerland. These services include:

Construction and masonry work

Garden landscaping

Carpentry and joinery work

Tiling

Painting work

Installation of windows, kitchens, and fitted wardrobes

Electrical installations

Demolition, cleaning, maintenance, and repair work on real estate

Exhibition stand assembly

Cleaning of movable property such as machinery

Installation, commissioning, testing, maintenance, or repair of goods

Software installation at clients’ premises

These types of services may require a foreign company to register for VAT, even if it does not provide any material in addition to the service.

Fiscal Representative in Switzerland

Foreign companies must appoint a fiscal representative domiciled or headquartered in Switzerland (Art. 67, para. 1, LTVA) to comply with their administrative obligations. This designation does not constitute a permanent establishment in Switzerland (Art. 67, para. 3, LTVA).

All documents necessary for VAT calculation must be accessible at the fiscal representative’s place of business within a reasonable time and until the expiration of the taxation right (Art. 42 LTVA). These documents include accounting records, purchase orders, delivery notes, copies of customer invoices, proof of payment, supplier invoices, and customs documents.

Exemption from VAT Registration for Foreign Companies

According to Article 10, paragraph 2, letter b of the LTVA and Article 121a of the OTVA, a foreign company is not required to register for VAT if it only provides certain types of services, regardless of the turnover achieved. These services include:

Services outside the scope of VAT: According to Article 21, paragraph 2, LTVA.

Services exempt from VAT: Defined in Article 23 LTVA.

Deliveries of certain energies: Electricity, natural gas, or heat supplied through a network to subjects in Switzerland.

Services localized in Switzerland: In accordance with Article 8, paragraph 1, LTVA.

Foreign suppliers providing telecommunications or IT services to non-VAT registered individuals do not benefit from this exemption. Foreign suppliers meeting the registration requirements must apply VAT to all taxable services in Switzerland.

Voluntary Registration and VAT Refund

If the exemption criteria are met, a company can voluntarily apply for registration in the VAT register from the beginning of the current fiscal period and must maintain this registration for at least one fiscal period (Article 11 LTVA).

Exempt foreign companies not applying for voluntary registration are entitled to a VAT refund on their imports and services received in Switzerland, in accordance with Article 107, paragraph 1, letter b of the LTVA and Article 151, paragraph 2 of the OTVA. However, companies providing only services outside the scope of VAT and choosing not to register are not entitled to a VAT refund (Article 121a OTVA).

My Swiss Company SA – Corporate Services Provider in Switzerland

VAT in Switzerland is a complex system that requires a deep understanding of tax obligations and specific regulations. Companies, whether local or international, must navigate through detailed declaration processes, rules on prepaid tax deductions, and strict document retention requirements. Although Swiss legislation is rigorous, it offers options such as exemption and prepaid tax deduction to simplify certain transactions and reduce overall tax burden.

The services of My Swiss Company SA, specialized in taxation, play a crucial role in assisting companies in complying with these regulations. My Swiss Company SA provides a comprehensive range of services, including assistance with VAT declaration, tax representation for foreign companies, and strategic advice to optimize VAT management. Additionally, we offer services for the creation and establishment of companies and corporations in Switzerland, ensuring full support at every stage of your entrepreneurial development.