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SWISS VAT EXPERT
What is VAT and how does the VAT return work?
VAT (Value Added Tax) is an indirect tax applied to the majority of goods and services supplied by Swiss companies. In practice, companies charge VAT on their sales and may deduct VAT paid on their business purchases. The difference between VAT charged and deductible input VAT is then declared and paid to the Federal Tax Administration by means of a VAT return. A clear understanding of this mechanism is essential, as any calculation error or VAT declaration error may result in adjustments, interest or tax penalties. This is why the VAT return must be prepared with rigour and on the basis of up-to-date accounting records.
Who is subject to VAT in Switzerland?
In Switzerland, VAT applies to the majority of companies carrying out a commercial activity. VAT liability depends mainly on the turnover generated and the type of activity performed.
When setting up your company, do you need to register for VAT?
When creating a company, VAT registration is not automatic. It depends on your turnover forecast and your business model.
What are the Swiss VAT rates in force (from) 2024?
Since 1 January 2024, VAT rates in Switzerland are as follows:
Standard rate 8,1 %
This rate applies to most goods and services, including everyday consumer products such as clothing, electronic devices, catering services, IT services, etc.
Special rate 3,8 %
The special rate for accommodation services applies to overnight stays with breakfast, even if breakfast is invoiced separately.
Reduced rate 2,6 %
This rate applies to certain goods and services considered essential, such as basic food products, prescription medicines, newspapers and magazines, as well as public transport.
VAT exemption 0,0 %
In Switzerland, certain goods and services benefit from an exemption from Value Added Tax (VAT). This exemption applies in particular to insurance and reinsurance transactions, financial transactions, medical services, educational services, the sale and leasing of building land, real estate transactions, as well as postal and telecommunication services of Swiss Post. Social and cultural services provided by non-profit organisations are also exempt. Swiss companies that export goods may also benefit from this VAT exemption, allowing them to remain competitive on international markets.
Check the VAT rate applicable to my activityMethods and modes of the Swiss VAT return
To properly manage your VAT in Switzerland, it is essential not to confuse the VAT calculation method (which determines the amount to be paid) with the VAT reporting method (which determines when the tax becomes due). This choice has a direct impact on the complexity of your accounting and on your available liquidity.
1. The two calculation methods (the “How much”)
The method determines how the net amount payable to the Federal Tax Administration (FTA) is calculated:
Effective method
The effective method: This is the standard method. You charge effective VAT to your customers and deduct the VAT paid on your own business purchases (input tax). You pay only the difference to the FTA. Advantage: Ideal if you have significant investments or expenses (purchase of goods, rent, IT costs).
Net Tax Rate (TDFN)
The Net Tax Rate (TDFN): This simplified method is reserved for SMEs. You do not deduct input tax. The tax due is determined by multiplying the total taxable turnover by the TDFN applicable to the sector or activity concerned. Taxable persons who meet the following two conditions may in principle prepare their returns using the TDFN:
- the annual turnover from taxable supplies (VAT included) does not exceed CHF 5.024 million
- the tax due does not exceed CHF 108,000 per year.
Advantage: Ultra-simple administrative management and VAT returns only twice a year (semi-annually).
Flat rates (TaF)
Public bodies and related sectors (private schools and hospitals, public transport companies, etc.), as well as associations and foundations, may apply the flat-rate method, regardless of the amount of their turnover. However, the use of the TDFN method is not permitted.
2. The two reporting modes (the “When”)
The reporting mode defines the event that triggers your tax liability in your invoicing software:
Agreed consideration
According to agreed consideration (default): VAT is due as soon as you issue the invoice. Even if the customer pays after 30 or 60 days, VAT must be declared for the period in which the invoice was issued. This is the standard mode for companies keeping full accounts (debtors/creditors).
Received consideration
According to received consideration (upon request): VAT is due only when you receive the payment. As long as the invoice has not been paid, there is nothing to declare.
Advantage: A major benefit for your cash flow, as you never pre-finance VAT for your customers. This mode requires a written request to the FTA.
Let's talk about your VAT situation
Briefly describe your activity and your current VAT situation. We analyse your case and get back to you within 24 hours with a clear and non-binding response.
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