Swiss VAT in 2021: rates, methods of payment and exemptions

Introduced in 1995, the Swiss value added tax (VAT) replaced the tax on turnover (sales). Since then, the VAT and its exemptions have constantly shifted, especially in 2010 and 2018. What will happen in 2021?

Bases and applicable rates

Calculating the VAT

Since January 1, 2018, there are three main VAT rates applicable in Switzerland:

• The standard VAT rate (7.7%) applies by default to any transaction that consists of selling a good or a service – this is the most common of the three;

• The special VAT rate (3.7%) applies to any accommodation service where an overnight stay is included, such as hotels;

• The reduced VAT rate (2.5%) applies to basic necessities, such as food, water health products or even certain reading materials (books, newspapers, magazines…), printed or electronic.

The details of these rates, still in force in 2021, are available in this PDF document.

Distance selling and e-commerce

Initially scheduled for January 1, 2021, the European e-commerce package aims to modify the VAT rules for Distance Selling (DSL) and e-commerce (B2C).

Although these measures have been pushed out 6 months from the original date and only apply to European Union countries, Switzerland will probably be affected in two ways:

• The tax exemption that used to apply to shipments with a value under €22 will be eliminated. This means that many low-priced items will now be subject to the VAT. It will therefore be necessary to report and pay the import tax electronically.

• The reform also aims to simplify VAT payment for online commerce. Merchant platforms such as Amazon will thus be forced to pay the VAT on behalf of the hosted vendor (when the product sold has a value less than €150).

Swiss companies should begin preparing themselves now, in anticipation of these changes to international transactions.

VAT regulations

Swiss companies

Following the major reforms of 2010, the Swiss VAT applies to every stage of a company’s production and distribution. In order to report Swiss VAT automatically, the company must fill out a special form.

To do so, you must have the VAT number associated with the Business Identification Number (UID) of the same company whose name is on the special form.

There are two standard ways to pay the VAT:

• Payments agreed upon (based on invoicing). This is the most common method;

• Payments received (based on receipts). This method is recommended for small companies without an accounting staff.

We’d like to mention an additional method which simplifies paying the tax bill: the net tax liability and flat rate method.

Customs and foreign companies

Companies headquartered abroad but with a presence in Switzerland are taxed in the same manner as local companies.

All imports from abroad into Switzerland are subject to customs duties and the VAT. As a result, shipments must be reported to the customs authorities (in the case of postal shipments, the service provider will report shipments to the customs authorities).

In the event that the value of the goods imported by a foreign company exceeds 10,000 Swiss francs, the standard VAT rate of 7.7% will apply.

Collecting agencies

Article 130 of the Federal Constitution stipulates that the VAT collected goes to the Swiss Confederation through two agencies:

• the Federal Tax Administration (FTA) for Swiss domestic trade;
• the Federal Customs Administration (FCA) for trade of imported goods and services.

Goods exempted from the VAT

Corporate purpose

In 2021 and for many years, instances of exemption have been rare in Switzerland.

Regardless of legal status, every company is subject to the VAT as soon as it:

• carries out a professional or commercial activity as a self-employed person;
• intends to capture revenue on a regular basis;
• acts in its own name towards third parties (natural or legal).

Only certain corporate purposes qualify a company to be exempt from the VAT, such as:

• non-profit sports and cultural purpose;
• goods and services related to medical treatment;
• training services;
• self-employed farming;
• self-employed pictorial art.

Volunteer-run organizations and non-profit institutions with turnover (sales) below CHF 150,000 are not subject to the VAT. You will find a complete list of exempted sectors in Article 23 of the VAT law.

Companies exempted from the VAT are those whose services are not taxable by the Swiss government.

Conditions for cancelling VAT registration

Any company, domestic or foreign, whose turnover (sales) do not exceed CHF 100,000 is exempted from the status of VAT taxpayer.

The liability status of VAT taxpayer may be cancelled in the following situations:

• liquidation of company assets;
• closure of the winding-up process;
• termination of business activities;
• turnover (sales) drop below the corresponding threshold.

In the event one of the above situations occurs, the company must send a cancellation request to the FCA within 60 days after the tax period. However, as soon as the company’s turnover (sales) reach or exceed the corresponding threshold, it must resubmit the VAT liability questionnaire.

You now have all the necessary information on rates, exemptions and scope of the VAT to import and export in Switzerland in the best possible way.