Switzerland: tax representation for VAT
An article on the basic information you need to know about value-added tax and a very useful tip for entrepreneurs who are starting up their business in Switzerland.
VAT (value-added tax) for companies in Switzerland
The RISTER fiduciary in Geneva and their experts can help you prepare all your Swiss company's VAT returns, review tax rulings and provide a VAT recovery service. We offer tax advice and VAT registration tailored to the specific nature of your business. Here is some important information to help you better understand VAT for a Swiss or foreign company that needs to be fiscally represented in Switzerland.
Value added tax (VAT) is a consumption tax. It is levied exclusively by the Swiss Confederation. A company must include VAT in the price of services and products sold in Switzerland and pay it to the Confederation. In return, it can deduct from this amount the input tax it has paid in the course of its business.
- Invoiced domestic VAT (for all stages of production/distribution and for companies providing services in Switzerland)
- Acquisition tax declared by the company (services provided by companies based abroad)
- Import tax (when goods are imported into Switzerland)
The following VAT rates apply
- for normal cases: 7.7% of turnover
- for the accommodation sector (including breakfast): special rate of 3.7%.
- A reduced rate of 2.5% applies to food and non-alcoholic beverages, books, newspapers and magazines, medicines and sports and cultural activities (everyday consumer goods).
Deduction of input tax
In the case of goods and services sold directly to consumers, VAT must be mentioned and, above all, included in the final price. This is not the case for business relationships: we usually work with net prices to which VAT is added.
In this context, the principle of input tax deduction plays an important role: as a good passes through several stages in its transformation from raw material to finished product, each of which is taxed on its added value, the creator of value can deduct the amount of VAT already paid at the previous stage.
In practice, this works as follows: once a quarter, the Federal Tax Administration (FTA) receives a self-assessment showing the total amount of VAT due. Any tax previously paid - whether by the supplier or (for imports) by the Federal Customs Administration (FCA) - can be deducted from this gross VAT amount. In this way, only the gross margin is subject to VAT.
Criteria for VAT liability
In principle, all companies, regardless of their legal form, are subject to VAT. However, if the turnover of services subject to VAT is less than CHF 100,000 per year (or CHF 150,000 for non-profit sports and cultural associations and charitable institutions), the company is exempt from VAT. However, those who do not pay VAT cannot claim input tax.
Tip: In the case of investments made with a view to starting a business, input tax can be claimed even if taxable sales have not yet been made (the so-called right to subsequent input tax relief).
Simplified calculation of net tax liability using flat rates
To simplify tax accounting, companies with annual sales of up to CHF 5 million and a tax burden of up to CHF 100,000 can use the net tax liability rate. This is a flat-rate taxation system based on empirical values from the practice of various industries; it is much simpler and saves time compared to the actual tax assessment.
Instead of sending out statements every three months, the net tax liability method allows you to send out statements only twice a year. The big advantage, however, is that sales are entered on a flat-rate basis and not every receipt needs to be included in the calculations.
If the net tax liability is calculated on a flat-rate basis, the input tax deduction is no longer available. On the other hand, customers will continue to be charged the normal VAT rates (and not the net tax liability rate).
Flat rates vary widely. They are based on annual sales, including sales tax.
Almost one third of all Swiss SMEs use the simplified net tax liability calculation. Swiss companies opting for the flat-rate method must use it for at least 1 year (previously 5 years). Companies opting for the effective VAT method must use it for at least 3 years.
Our fiduciary RISTER, based in Geneva, will assist you in the administrative management of your company and will take care of your tax returns, VAT statements and the monitoring of your company's situation, as well as the monitoring of tax assessments, the handling of complaints and possible appeals, and the provision of tax advice.
Contact us to begin your consultation today. We'd love to get to know you and discuss the next steps in your project.
Fill out our contact form or call us at +41(0)22 566 82 45.