Zurich GMT +1
EY
Maagplatz 1 CH-8005 Zurich Switzerland
Indirect tax contacts
Benno Suter
+41 (58) 286-43-86 benno.suter@ch.ey.com
Silke Hildebrandt-Stürmer +41 (58) 286-32-41 silke.hildebrandt-stuermer@ch.ey.com
Berne GMT +1
EY
Schanzenstrasse 4a
P.O. Box CH-3001 Berne Switzerland
Indirect tax contact
Benno Suter +41 (58) 286-43-86 benno.suter@ch.ey.com
Geneva GMT +1
EY
Route de Chancy 59
P.O. Box 48 CH-1213 Petit-Lancy 1 (Geneva) Switzerland
Indirect tax contacts
Benno Suter
+41 (58) 286-43-86 benno.suter@ch.ey.com
Ashish Shina +41 (58) 286 59 06 ashish.sinha@ch.ey.com
Zug GMT +1
EY
Gotthardstrasse 26 CH-6302 Zug Switzerland
Indirect tax contact
Andrea Sohst
+41 (58) 286-75-20 andrea.sohst@ch.ey.com
A. At a glance
Name of the tax
Value-added tax (VAT)
Local names Mehrwertsteuer (MWST)
Taxe sur la valeur ajoutée (TVA)
Imposta sul valore aggiunto (IVA)
Date introduced 1 January 1995
Trading bloc membership European Free Trade Association (EFTA)
Administered by Swiss Federal Tax Administration (https://www.estv.admin.ch) (SFTA)
VAT rates
Standard 7.7%
Reduced and special 2.5%, 3.7%
Other Zero-rated (0%) and exempt
VAT number format CHE-123.456.789 MWST
VAT return periods
Quarterly
Biannually (if the taxable person has applied to use the net tax rate method)
Monthly (optional if excess of input over output tax occurs regularly)
Thresholds
Registration Established CHF100,000 (EUR97,000) Non-established CHF1 (EUR1) if worldwide turnover exceeds CHF100,000 Distance selling CHF100,000 (EUR97,000) of low-value goods
Intra-Community acquisitions
Electronically supplied services
N/A
CHF1 (EUR1) for B2C if worldwide turnover exceeds CHF100,000 (EUR97,000)
Recovery of VAT by non-established businesses Yes
B. Scope of the tax
VAT applies to the following transactions:
• The supply of goods or services made in Switzerland for consideration by a taxable person. In this context, it should be noted that Swiss VAT regulation follows a rather broad definition of “supplies of goods” including, e.g., sale of energy (gas, oil, electricity), lease agreements, room cleaning, work performed on goods, even if the goods are not altered by the work but only tested, calibrated, regulated, programmed, checked for their function, etc. Non-established suppliers that are obliged to be VAT registered in Switzerland must account for Swiss VAT on all taxable supplies performed in Switzerland.
• The acquisition by any person in Switzerland of certain types of services or, in some cases, of work on immovable goods from non-established nor registered suppliers (services and work on immovable goods for which the recipient is liable for the VAT due). Services and work on immovable goods purchased by nontaxable persons are not subject to reverse charge if the value of the acquired supplies does not exceed CHF10,000 per calendar year.
• The importation of goods from outside Switzerland and the Principality of Liechtenstein, regardless of the status of the importer.
The Principality of Liechtenstein and DE-Büsingen are considered to be the domestic territory for Swiss VAT and Customs purposes. Likewise, Switzerland is considered to be part of the ter ritory of the Principality of Liechtenstein for the purposes of VAT in the Principality of Liechtenstein (Swiss Customs Territory). However, Switzerland and the Principality of Liechtenstein have their own authorities. The highest Court for the Swiss Customs Territory is the Swiss Supreme Court.
Effective use and enjoyment. In Switzerland, no services are subject to “use and enjoyment” provisions.
Transfer of a going concern. Switzerland applies the concept of a transfer of going concern as found in several other jurisdictions. It is called the “notification procedure” and requests the transferor to transfer a business or partial business as a taxable, but zero-rated transaction, since the taxation is being notified to the Swiss Federal Tax Administration (SFTA) instead. Furthermore, the transferee assumes any residual values of capitalized input tax from the trans feror. Effectively, the notification procedure is mandatory. In addition, a voluntary notification procedure is available upon request with the SFTA.
C. Who is liable
A taxable person is any person who, regardless of legal form, purpose or result, carries out a busi ness in Switzerland. Carrying out a business involves the independent exercising of professional or commercial activities, together with the intention to execute regular transactions and acting externally in one’s own name.
Exemption from registration. An exemption from liability to register for VAT applies to any per son who:
• Generates a worldwide annual turnover from taxable supplies of less than CHF100,000
• Carries on a business based abroad that exclusively makes supplies in the Swiss territory that are VAT exempt with credit and/or supplies of services with its place of supply in Switzerland but subject to the reverse charge in Switzerland
• Provides supplies of electricity power in cables, natural gas via the natural gas distribution grid and district heat to a taxable recipient in Switzerland
Voluntary registration and small businesses. Any person who carries on a business and is exempt from the liability to register (tax liability) has the right to waive exemption from the tax liability, provided it has an establishment or a taxable activity in Switzerland. Exemption from tax liabil ity must be waived for at least one tax period.
Group registration. Legal entities with their seat in Switzerland or commercial units in Switzerland can form a VAT group if they are related as a result of “joint supervision.” 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 the Principality of 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 the Principality of Liechtenstein entities as the Principality of Liechtenstein and Switzerland have independent tax authorities.
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 VAT group submits a single, consolidated VAT return for all its members. VAT is not chargeable on transactions between group members.
All members of a VAT group in Switzerland are jointly and severally liable for VAT debts and penalties.
From a practical perspective, the creation, modification or liquidation of a Swiss VAT group is regulated by very specific conditions, both in terms of authorization and timeline.
Holding companies. Holding companies can be included in a VAT group in Switzerland, subject to the usual conditions of control (see above). In addition, any other person can be included in a VAT group, even if it is not VAT registered, as long as control is given.
Cost-sharing exemption. The VAT cost-sharing exemption has not been implemented in Switzerland.
Fixed establishment. A permanent establishment is defined in Switzerland as a fixed place of business through which the activity of the business is wholly or partly carried on.
Non-established businesses. 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.
A non-established business making any local supply of goods or services in Switzerland that are not subject to reverse charge in Switzerland becomes liable for Swiss VAT if its global turnover exceeds the CHF100,000 threshold. This results in an obligation for any non-established business with a global turnover of more than CHF100,000 annually, to register for Swiss VAT from the first franc of taxable turnover generated in Switzerland (whereas a Swiss-established business is obliged to register for Swiss VAT only once the threshold of CHF100,000 is reached).
Non-established entities supplying low-value goods to Swiss customers for a total of CHF100,000 or more annually need to register for Swiss VAT, import the goods and charge Swiss VAT on the sale to Swiss customers.
Once a non-established business is registered for Swiss VAT purposes, it is liable to charge VAT on all taxable supplies that have a place of supply in Switzerland.
Tax representatives. A non-established business must appoint a Swiss established tax representa tive if it supplies goods or services subject to Swiss VAT. Swiss VAT registrations of non-estab lished businesses are not possible otherwise. The tax representation relationship must be notified to the tax authorities via the filing of an ad hoc tax representation letter. The tax representative does not assume the VAT liability of represented taxable persons.
Reverse charge. The reverse-charge mechanism applies to the following situations:
• Services acquired by a Swiss recipient where the services are subject to the general place of supply rule, supplied by a supplier domiciled abroad who is not registered for Swiss VAT, and the place of supply is in the Swiss Customs Territory (place of supply in the customer country). Exceptions apply for telecommunication or electronic services to nontaxable recipients and services subject to special place of supply rules.
• Data carriers without market value imported into Switzerland, and certain services and rights are associated with these data carriers.
• Work on immovable goods located in Switzerland provided by a business established abroad and not registered for Swiss VAT purposes, in case the supply has not been subject to import VAT.
Any Swiss recipient is liable for the settlement of VAT under the reverse-charge mechanism if the recipient is a taxable person or if the value of the supplies received exceeds CHF10,000 per calendar year.
As an exception to the general reverse-charge rule, supplies of telecommunication and electronic services to persons who are not registered for VAT are subject to Swiss VAT and require
the supplier to register for and charge VAT in Switzerland, if their worldwide turnover exceeds the annual threshold of CHF100,000.
For any other services that fall under the general place of supply rule, the reverse-charge mecha nism applies regardless of whether or not the recipient of the services is registered for VAT.
If a non-established supplier becomes registered for Swiss VAT purposes, the reverse-charge mechanism no longer applies, however, and the supplier must charge VAT on all taxable services supplied to Swiss recipients.
The place of supply for most supplies of services is the customer’s country (fallback rule). In the circumstances described above, the customer must account for VAT under the reverse-charge procedure. However, some exceptions exist. These exceptions, for which additional consideration regarding the place-of-supply rules needs to be made, include the following:
• Services that require the physical presence of the customer, who is a natural person, at the place where supplier is domiciled (for example, beauty or curative therapies and treatments, family advisory and childcare), even if exceptionally supplied from a distance
• Services of travel agents and event organizers at the place of supplier. However, tour operators selling travel do not fall into this category
The following services are taxed at the place of activity or real estate:
• Services in the fields of culture, art, sport, science, education or entertainment and similar services, including the activities of organizers and related activities
• Restaurant services
• Passenger transport services
• Services related to immovable property (for example, intermediation, administration, valuation, services in connection with the preparation and coordination of construction works such as archi tectural, engineering and supervising services, and land and building monitoring, and accom modation services)
• Services in the field of international development and humanitarian aid
Domestic reverse charge. The domestic reverse-charge mechanism applies to supplies of electric ity in cables, natural gas via the natural gas distribution grid and district heat if the Swiss service recipient is a VAT-registered business.
The place of supply of electricity by cable or natural gas via the gas distribution network is based on where the recipient of the supply is established or in the absence of an establishment, where the electricity, gas or heating is consumed, despite the fact that these are supplies of goods and not services.
Digital economy. Nonresident providers of electronic or telecommunication services to non-VATregistered persons domiciled in Switzerland (i.e., business-to-consumer (B2C) supplies) must register for VAT in Switzerland and charge Swiss VAT, if their worldwide turnover exceeds the annual threshold of CHF100,000. Once VAT registered, the nonresident providers must declare all domestic supplies of goods and services in Switzerland, including services subject to the general place of supply rule regardless of whether the recipient is registered for VAT or not.
Nonresident providers of electronically supplied services to business-to-business (B2B) supplies are not required to register and account for VAT on supplies in Switzerland. Instead, the cus tomer is required to self-account for VAT due via the reverse-charge mechanism (see Reversecharge subsection above). There are no other special rules in Switzerland for e-commerce supplies.
At the time of preparing this chapter, it is expected that new rules will come into effect in Switzerland for the digital economy from 1 January 2023 or 2024.
Online marketplaces and platforms. Contrary to the European Union (EU), Switzerland has not yet introduced marketplace taxation. For distance selling supplies, mail-order companies and online dealers that supply more than CHF100,000 per year of low-value goods to customers in Switzerland are obliged to register for Swiss VAT. Distance sellers are deemed to execute domestic sales for such goods and are regarded as the importer of record. Consequently, they must charge Swiss VAT to their customers, not only on their sales of low-value goods, but also on all goods for which the amount of import tax exceeds CHF5.
Low-value goods are defined as goods whose import tax amount do not exceed CHF5 (i.e., value of imported goods (including transportation costs), taxable at standard VAT rate of 7.7%, is inferior to CHF65). Low-value goods are exempt from import tax when crossing the border.
Vouchers. Swiss VAT law distinguishes between value vouchers and supply vouchers. A typical distinction is that with supply vouchers the economic risk of price changes resides with the issuer of the vouchers. Contrary to the value voucher, the inflation risk shifts to the voucher holder. Value vouchers have their tax point at the time of their redemption, whereas supply vouch ers are to be taxed at their issuance. To reverse any turnover of supply vouchers, a tracking inventory of expirations of supply vouchers is crucial and must be evidenced by the issuer.
Registration procedures. Businesses that intend to register for Swiss VAT need to file an applica tion with the SFTA. The application must be filed electronically via the SFTA’s webpage, avail able in German, French and Italian. Both general and financial information must be provided to finalize the VAT registration process. On average, the application procedure takes about two weeks.
Deregistration. Taxable persons are required to notify the SFTA in writing within 30 days after ceasing their entrepreneurial activities in Switzerland or with concluding the liquidation proce dure at the latest. For non-established businesses, the deregistration is due by the end of the tax period in which the last supply was performed in Switzerland.
Changes to VAT registration details. Any relevant changes to a taxable person’s VAT registration details must be announced in a timely manner. The Swiss VAT law does not provide any specific timeline or penalties in this regard.
D. 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: 7.7%
• Reduced rate: 2.5%
• Special rate: 3.7%
• Zero-rate: 0%
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 0% (i.e., tax-exempt with credit)
• Exports of goods and services
• Supplies of certain goods and services to airlines
• Services with a place of supply abroad
• Supplies of investment gold
Examples of goods and services taxable at 2.5%
• E-books, e-newspapers and e-magazines, as well as printed of the same kind
• Food and drinks (except when provided by hotels and restaurants), except for alcoholic drinks
• Drugs
• Tap water
Examples of goods and services taxable at 3.7%
• 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 (see Section F). Some supplies are classified as tax exempt with credit (zero-rated), which means that no VAT is chargeable, but the supplier may recover the related input tax.
Examples of exempt supplies of goods and services (i.e., tax-exempt without credit)
• Health care (in certain cases)
• Financial services
• Insurance
• Education
• Real estate
Option to tax for exempt supplies. Certain supplies of goods and services may be voluntarily subjected to tax by openly charging VAT on the invoice (option), e.g., certain health care, educational and cultural services as well as renting or leasing of immovable commercial property. However, restrictions may apply and the right to opt should be reviewed on a case-by-case basis.
E. Time of supply
The time when VAT becomes due is called the “time of supply” or “tax point.” In Switzerland, taxable turnover must be reported in the quarter (or month, if monthly declarations are filed) in which the sales invoice for a supply is issued or in which payment is received (if no invoice is issued). If the declaration is made on a cash basis, the turnover must be declared for the quarter in which payment is collected. Exceptions apply in case of VAT rate changes and various other special events. The application of the method on payment collected requires a written application with SFTA.
Deposits and prepayments. The tax point for a deposit and prepayment is when the supplier receives the consideration or when the invoice is issued, whichever is earlier.
Continuous supplies of services. There are no special time of supply rules in Switzerland for con tiuous supplies of services. As such, the general time of supply rules apply (as outlined above). However, exceptions apply when the VAT rates change, and then specific transitional rules would apply.
Goods sent on approval for sale or return. There are no special time of supply rules in Switzerland for supplies of goods sent on approval for sale or return. As such, the general time of supply rules apply (as outlined above).
Reverse-charge services. The tax point for reverse-charge services for a taxable person is when the invoice is received or when the service fee is paid. In all other situations, including declara tions made on a cash basis, the effective payment date is decisive.
Leased assets. There are no special time of supply rules in Switzerland for supplies of leased assets. As such, the general time of supply rules apply (as outlined above).
Imported goods. The time of supply for imported goods is the official date of importation.
Distance sales. There are no special time of supply rules in Switzerland for supplies of distance sales. As such, the general time of supply rules apply (as outlined above). However, special rules for import VAT and customs duties are applicable.
F. Recovery of VAT by taxable persons
A taxable person may recover input tax to the extent that the associated purchases of goods and services are business related and are not used for exempt supplies or for receiving public subsi dies. By the time of the declaration of input tax, the input tax must have been paid or been declared as a reverse charge. A taxable person generally recovers input tax by deducting it from output tax.
Input tax includes VAT charged on goods and services supplied in the Swiss Customs Territory, VAT paid on imports of goods and VAT self-assessed on reverse-charge supplies.
According to a recommendation of the SFTA, a valid tax invoice or customs document and proof that the input tax was paid should support a claim for input tax.
The time limit for a taxable person to reclaim input tax in Switzerland is five years.
Nondeductible input tax. Input tax may not be recovered on purchases of goods and services that are used for exempt supplies, or do not serve a business purposes (for example, goods acquired for private use by an entrepreneur) or is related to a public subsidy.
• Private expenditure
Examples of items for which input tax is nondeductible
Examples of items for which input tax is deductible (if related to a taxable business use)
• Purchase, hire, lease, maintenance and fuel for cars, vans and trucks (output tax is due on the private use of company cars)
• Parking
• Conferences, seminars and training courses
• Books
• Business use of home telephone (output tax is due on the private element)
• Advertising
• Transport
• Hotel accommodation
• Business gifts (subject to restrictions; output tax may be due)
Partial exemption. Input tax directly related to making exempt supplies without credit is gener ally not recoverable. If a Swiss taxable person makes both tax-exempt supplies without credit and taxable supplies, it may not recover input tax in full. This situation is referred to as “partial exemption.”
The amount of input tax that a partially exempt business can recover may be calculated using the following two-stage calculation:
• The first stage identifies the input tax that can be directly allocated to taxable or to exempt supplies without credit. Input tax directly allocated to taxable supplies is deductible, while input tax directly related to exempt supplies without credit is not deductible. Exempt supplies with credit are treated as taxable supplies for these purposes.
• The next stage identifies the amount of the remaining input tax (for example, input tax on general business overheads) that can be partially recovered. The calculation of the recoverable portion can be performed using a general pro rata method based on the respective values of taxable and exempt without credit supplies made. In addition to the general pro rata method, other industry-specific methods are available, such as the lump-sum method for banks.
When applicable, it is recommended to get the partial exemption standard or special method validated up front by the tax authorities. Generally, this applies for special methods, but can vary on a case-by-case basis.
Capital goods. Input tax recovery is allowed on capital goods in Switzerland. However, the input tax recovery is subject to the capital goods being monitored and corrected in accordance with the actual use of the said capital goods. The useful life of the capital goods is defined as 5 years (moveable and intangible goods) or 20 years (immovable goods) and corrections must be consid ered pursuant to this duration. The capital goods adjustments also apply to input tax incurred on services that represents a durable capitalized asset, such as IP, software invention, several year licenses.
Refunds. If the amount of input tax recoverable in a period exceeds the amount of output tax payable in the same period, the taxable person is entitled to a refund of the excess amount. A VAT repayment is paid automatically within 60 days after the return is received by the Swiss VAT authorities.
Pre-registration costs. Input tax incurred on pre-registration costs in Switzerland is generally not recoverable unless under certain circumstances such as retroactive registrations or via a tax succession by a business transfer.
Bad debts. Bad debt relief applies in Switzerland only once the debt has been written off in the accounts and accounted as a loss from a Swiss accounting perspective. Only then can the output tax due be corrected.
Noneconomic activities. Input tax incurred on purchases that are used for noneconomic activities is not recoverable in Switzerland.
G. Recovery of VAT by non-established businesses
The Swiss VAT authorities refund VAT incurred by businesses that are neither established nor registered for VAT in Switzerland or the Principality of Liechtenstein and that have not made any supplies in Switzerland or the Principality of Liechtenstein. A non-established business may claim Swiss VAT to the same extent as VAT-registered businesses. However, restrictions apply to certain types of expenditure for claimants established in certain countries.
Switzerland applies the principle of reciprocity; meaning the country where the claimants is established must also provide VAT refunds to Swiss businesses. Swiss VAT can only be refunded on the condition of reciprocity to taxable persons established in the following countries:
Australia Greece Poland
Austria Hong Kong Portugal
Bahrain Hungary Romania
Belgium Ireland Saudi Arabia
Bermuda Israel Serbia
Bulgaria Italy Slovak Republic
Canada Japan Slovenia
Croatia Latvia Spain
Cyprus Lithuania Sweden
Czech Republic Luxembourg Taiwan
Denmark Macedonia Turkey
Estonia Malta United Arab Emirates
Finland Monaco United Kingdom
France Netherlands United States
Germany Norway
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 representa tive 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 CHF500. Erroneously paid VAT on supplies that are not subject to VAT or exempted from VAT with credit will not be refunded.
The following documentation must accompany the claim:
• Completed VAT refund claim (Forms 1222 and 1223). Form 1222 identifies the Swiss tax rep resentative 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 authori ties in the country where the claimant is established, to prove the business status of the claim ant.
• Applications for refunds of Swiss VAT may be sent to the following address: Eidgenoessische Steuerverwaltung Hauptabteilung Mehrwertsteuer Schwarztorstrasse 50 CH-3003 Bern Switzerland
• Refunds are generally made within six months after the date of application.
Late payment interest. The SFTA may pay interest on refunds made after the refund period of six months after the date of refund application, if reciprocity rules are observed. Late payment inter est is paid at a rate of 4% per annum.
H. Invoicing
VAT invoices. A Swiss taxable person must generally provide a VAT invoice for all taxable sup plies made, including exports. A VAT invoice is necessary to support a refund under the VAT refund scheme for non-established businesses.
Credit notes. 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. If sent electronically the receival of the credit note should be tracked.
Electronic invoicing. Electronic invoicing is allowed in Switzerland, but not mandatory. However, data and information transmitted and stored electronically that are relevant for claiming input tax, or levying or collecting tax, must meet the following requirements in order to be of the same evidential value as data and information readable without auxiliary means:
• Proof of origin
• Proof of integrity
• Dispatch not contested
These requirements can be met by applying an advanced electronic signature.
Simplified VAT invoices. Invoices issued by automatic cash register systems (receipts), do not need to include information on the recipient of the supply, provided that the consideration disclosed on the receipt does not exceed the amount of CHF400.
Self-billing. Self-billing is allowed in Switzerland. No formal additional requirements other than the general invoicing requirements apply to self-billing. However, parties are required to agree
on processes, i.e., containing a receival tracking and proxy for the self-billing entity, which entitles the use of the supplier’s name and invoicing data.
Proof of exports. Swiss VAT is not chargeable on supplies of exported goods. However, to quali fy as VAT-free, export supplies must be supported by evidence that the goods have left Switzerland. Acceptable proof includes the officially validated customs documentation.
Foreign currency invoices. If a Swiss VAT invoice is issued in a currency other than the domestic currency, which is the Swiss franc (CHF), no conversion rate or CHF amount must be stated on the invoice. The amounts must be converted into CHF in the VAT report only, using the appropri ate exchange rates published by the federal tax administration, 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.
Supplies to nontaxable persons. Swiss VAT law does not, in general, distinguish between B2B or B2C supplies. The only exception is in the context of supplies of telecommunications and elec tronic services and the application of the reverse-charge mechanism to those services. As such, there are no special rules for invoices issued to private consumers, and therefore full VAT invoices must be issued for all supplies.
Transactions between related parties. In Switzerland, there is a mandatory obligation to apply arm’slength pricing to any transactions between related parties. Offsetting of supplies between related parties is forbidden for statutory accounting purposes, but also due to strict VAT rules. All sup plies between related parties must be recognized on a gross level and with arm’s-length pricing. The same applies for barter trades. Global profit split methods and cost sharing are not accepted for VAT purposes if they involve offsetting of supplies. Offsetting of cash balances is, however, permissible.
Records. Record keeping requirements are provided by the Swiss Commercial Law. There is no specific requirement from an indirect tax perspective. VAT-relevant records to be kept include VAT returns, agreements, general accounting, invoices, booking vouchers documenting each booking record, etc.
Records that must be archived must completely comply with the Swiss archive and bookkeeping requirements and need to be accessible and readable with immediate effect without delay. In principle, records must be kept in the Swiss territory but may also be retained outside, provided Swiss bookkeeping and archiving rules are strictly complied with.
Record retention period. Considering the 10 years of absolute statute of limitations in Switzerland, the recommended retention period is respectively 16 years (and 26 years for docu ments related to immovable property).
Electronic archiving. Electronic archiving is allowed in Switzerland, but not mandatory. However, electronically stored documents must meet specific criteria of authenticity, origin and integrity (among other).
I. Returns and payment
Periodic returns. Swiss VAT returns are usually submitted for quarterly periods. If the taxable person has applied to be taxed under the net 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 regu lar excess of input over output tax may apply to submit monthly returns. VAT liabilities must be paid in CHF.
Periodic payments. The VAT return is due, together with full payment (by bank transfer only), 60 days after the end of the VAT settlement period.
Electronic filing. Electronic filing is mandatory in Switzerland for all taxable persons (with effect from 1 January 2021). However, filing electronically does not prevent a non-established business from appointing a tax representative.
Data and information that are relevant for claiming input tax or levying or collecting tax can be transmitted and archived electronically or in a similar manner. They 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 not contested
Special legal provisions t require the transmission or storage of the data and information men tioned in a particular form.
Payments on account. Payments on account are not required in Switzerland.
Special schemes. Net tax rate scheme. If a taxable person does not generate more than CHF5.020 million turnover from taxable supplies annually and in the same period does not have to pay more than CHF109,000 in VAT, calculated at the net tax rate that applies to it, it may report VAT under the net tax rate method. When using the net tax rate method, the VAT due is determined by mul tiplying 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 sector 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.
Margin scheme. A VAT margin scheme is applicable to supplies of works of art, antiquities and collector’s items. In general, if the taxable person has acquired collectibles such as works of art, antiques and the like, it may deduct the purchase price from the sales price in order to calculate the tax, provided that it has not deducted any input tax on the purchase price (margin tax). If the purchase price is higher than the selling price, the loss can be offset by subtracting the difference from the taxable turnover. If such collector’s items are imported by the reseller, the paid import tax may be added to the buying-in price.
Notional input tax deduction. A taxable person may deduct notional input tax if it acquires an individualizable movable good in the course of a business activity entitling it to input tax deductions; and the VAT on the acquisition of the good has not been openly passed on to the business.
Annual returns. Annual returns are not required in Switzerland.
Supplementary filings. Annual turnover and input tax reconciliation. The preparation of an annual turnover and input tax reconciliation is a mandatory requirement in Switzerland. This document, however, does not, have to be filed as such to the SFTA. In case discrepancies are revealed further to the filing of a VAT return, a finalization form (or corrective returns) must be filed.
Correcting errors in previous returns. If a taxable person discovers errors in their tax returns in the course of drawing up their annual accounts, it must correct them at the latest in the so-called
finalization return to be filed online (as of 1 January 2021) within 180 days (plus 60 days) after the end of the relevant business year.
Digital tax administration. There are no transactional reporting requirements in Switzerland.
J. Penalties
Penalties for late registration. Taxable persons should be registered with the federal tax adminis tration 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 CHF800,000 may be charged. The amount of the fine varies depending on the circumstances.
Penalties for late payment and filings. Late payment interest at a rate of 4% per annum may be assessed for the late payment of VAT. For one-off cases with no recurring intentions, a maximum penalty of CHF10,000 may be charged per incompliance.
Penalties for errors. Any person who willfully or negligently reduces the tax claim to the detri ment of the state by wrongly stating output or input tax must be liable to a fine not exceeding CHF400,000.
In addition, if the tax evaded is transferred in a form that entitles the taxable person to make an input tax deduction, the fine must not exceed CHF800,000.
However, any person who reduces the tax due to the state by truthfully declaring relevant tax factors, but by willfully qualifying them incorrectly for tax purposes must be liable to a fine of up to CHF200,000. If the offense is committed through negligence, the fine is up to CHF20,000.
Penalties for fraud. Any person who willfully or negligently reduces the tax claim to the detriment of the state by not declaring in a tax period all receipts; declaring receipts from supplies exempt from the tax that are too high; not declaring all supplies subject to reverse charge; declaring expenses entitling to an input tax deduction that are too high; obtaining an incorrect refund; or obtaining an unjustified tax abatement can be liable for a fine of up to CHF800,000. If the tax advantage obtained by the act is greater than the threatened penalty and the offense was committed willfully, the fine may be increased to a maximum of two times the tax advantage.
Personal liability for company officers. The Swiss VAT law foresees that responsible private indi viduals (i.e., board of directors, CFOs, finance directors) are personally liable for penalties exceeding CHF100,000.
Statute of limitations. The statute of limitations in Switzerland is five years. The statute of limi tation is, however, interrupted in the event of a written request to establish or correct a tax claim, a ruling, a decision or the commencement of an audit. If the statute of limitation is interrupted by the tax administration, it begins to run again for two years. If the statute of limitation is inter rupted by the taxable person, it begins to run again for five years. The absolute statute of limita tion is, however, limited to 10 years from the end of the tax period in which the tax claim arose.