VAT in Switzerland

The Swiss VAT framework was first implemented in Switzerland in 1995 and is now governed and regulated by the Swiss Federal Tax Administration which closely monitors compliance to the regulations set out by VAT for businesses who aren't directed by Swiss residents. There are specific requirements for businesses who are non-resident operated and one of the requirements is to register for non-resident trader VAT. Additionally, VAT is deducted from every sale, even raw materials.

The development of a Swiss business requires a number of regulations to be followed, as well as a number of registrations and taxation fulfillments. The business also must be registered for VAT.

The Swiss VAT rate is the lowest in the Euro continent at just 8% and the country also allows for reduced VAT on some items like food, medical supplies and books, which feature a VAT of 2.5%. Hospitality VAT rates for accommodation feature a VAT of 3.8% and some services such as health, education and social services is exempt from the VAT.

An additional thing to note is that Switzerland is not part of the EU, so it is able to change its VAT to whatever suits its current economic climate. This also means that all companies are unequivocally required to charge and collect all taxes required and send them to the Swiss taxation department.

Rules regarding VAT apply for foreign business in Switzerland, which are:

• Only approved currency rates are allowed
• All corrections must be processed
• Invoices sent to customers must be detailed and correct
• E-Invoices must feature signatures and a recipient agreement
• All documents regarding receipts, sales and VAT must be stored for 10 years

Switzerland chose to implement similar rules to the EU in 2010 which related to reverse charges and as a result, companies with services requiring a VAT registration have greatly been reduced.

Business who conduct the following activities are required to register for VAT:

• Import goods into to Switzerland
• Selling and buying goods in Switzerland
• Set up online stores for Swiss consumers
• Use Swiss warehouses to store goods before sale
• Plan events which feature entrance fees
• Are users of services with a reverse charge rule

Prior to a VAT registration, a business is required to be registered in Switzerland with the Commercial Registry. Following this registration, a business is then required to apply at the Local Federal Tax Administration Office or lodge an application online. Once this application is approved the business will receive a UID or a Unternehmens-Identifikationsnummer.

Any profit that a business makes in Switzerland is taxed by VAT. In some cases, businesses who pay those VAT fees are given the chance to get a rebate on these payments by the Swiss Government but are only able to be given these rebates once a year and some foreign companies are unable to qualify for these. To retrieve these rebates or refunds, a business owner must fill out an application, sign it and send it to the Federal Tax Administration of Switzerland prior to the 30th of June.

There are also other documents required, such as invoices and proof of VAT registration. Following the analysis of these evidential documents, the refund will be processed within 6 to 9 months.

Refunds of VAT payments are also able to be applied for by those who purchase goods for deportation. To capitalise on these refunds, there is documentation required which shows that deportation has happened or is intended and also the receipts as proof of purchase for the goods. This information can be then handed over to a VAT Refund Station, which can normally be located in an airport or travel hub.

As Switzerland is an active member of the Economic Free Trade Association (EFTA) it is also subjected to similar taxation regulations as the EU. Simply this means that a business owner who sells goods in a country will be required to pay the VAT in that particular country. On top of this, there are also some exemptions which apply to electronics, telecoms, broadcasting and catering along with educational services.

You can find more information on this on our website or you can contact one of our business consultants for more information.