The VAT Revision - Part 2: Changes for Foreign Companies

The Value Added Tax (VAT) in Switzerland is undergoing a complete revision. The first part of the revision has been in effect since 2010. Now, the second part will follow from January 1, 2018. This leads to significant changes in some areas. According to the Federal Council, 30,000 new VAT liabilities are expected. Findea explains in a four-part series of articles how the VAT revision came about and what the main changes are. The first article illustrated why the VAT revision is so important. This second part discusses the specific changes for foreign companies.

Expansion of subjective tax liability for foreign companies

‍After the VAT revision, this is regulated in the new Art. 20 Para. 2 Let. a VAT Act. Previously, companies that generate a turnover of less than CHF 100,000 domestically per year are exempt from VAT. This is a significant disadvantage for Swiss companies compared to their foreign competitors, who generate only a portion of their turnover in Switzerland. To eliminate this disadvantage, the global turnover is now used to assess tax liability. As a result, according to expectations of the Federal Council, 30,000 foreign companies will be newly subject to VAT. This is estimated to mean additional revenue of approximately 40 million Swiss Francs. Thus, this is probably the most important change brought about by the VAT revision.

‍Adjustment in mail-order business from January 1, 2019

‍When goods are shipped to Switzerland, normally the Swiss import tax applies on importation. Under current law, for shipments that result in a tax amount of CHF 5.00 or less, the collection is waived for economic reasons. This corresponds to shipments with a goods value of about CHF 62.50 at the regular VAT rate of 8% or CHF 200.00 at the reduced rate of 2.5%.

The mail-order company in Switzerland becomes liable for VAT if it achieves turnover from shipments with tax values below CHF 5.00 in Switzerland of at least CHF 100’00 per year. In this case, his deliveries will be considered as domestic shipments. Thus, he owes Swiss VAT on all subsequent deliveries to Swiss customers. From the beginning of the tax liability, the mail-order company conducts the import of goods in its own name. Accordingly, it can also deduct the import tax as input tax since it is considered an importer.

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