Immediate measures to address Swiss VAT implications related to the novel coronavirus
The current situation with the novel coronavirus triggers a new working environment for employees and businesses and requires adaptation to these new circumstances. The measures outlined below may be considered by businesses to address their Swiss VAT position in light of the new situation.
Similar measures are considered for direct tax purposes as well. Please see our separate direct tax update.
1. Filing of Swiss VAT returns
In Switzerland, the current filing period corresponds to the calendar year. In principle, the Swiss VAT returns are subject to a quarterly filing period and the VAT form must be submitted unsolicited within 60 days of the end of the corresponding reporting period: 1st quarter until 30 May / 2nd quarter until 30 August / 3rd quarter until 30 November / 4th quarter until 28 February.
In order to strengthen its position, the taxable business may review the following options:
Extension of VAT return filing deadline:
The deadline for submission of the VAT return can be submitted online (no formal written request) and is in practice usually granted until the due date of the following reporting period. This in particular allows for some relief with respect to workload, taking into account the set-up or adjustment of the IT-systems for home office working spaces and potentially limited working capacities. However, the extension of filing deadline does in itself not affect the payment deadline.
Extension of payment deadline and of instalment payments:
In case that the payment of VAT (plus interest) causes the taxable business significant hardship, the Swiss Federal Tax Administration (SFTA) may agree upon request of the taxable business to allow for an extension of the payment period or for the agreement of instalment payments.
In principle, despite the extension of payment deadline, the VAT payable becomes due within 60 days after the end of the respective filing period and is thus usually subject to interest for late payment of 4% as of the date the filing obligation would have been due. In light of the current extraordinary circumstances and as a temporary measure valid as of 21 March 2020 until 31 December 2020, the SFTA and the Swiss Federal Customs Authority do not levy any interest for late payments for VAT, customs, special tax on consumption and excise duties, or for incentive taxes. Similar measures apply to direct federal taxes. The agreements on deadline extension or payment installment are usually subject to the provision of reasonable security. It may be expected that the SFTA would adjust that requirement to the individual circumstances of the business concerned to avoid considerable hardship under the particular circumstances.
1.2. Review of filing period
In respect of the VAT filing period, it might be an option to review the suitability of the filing period for the taxable business:
- Monthly reporting: If the business is on a regular basis in an input VAT credit position, the business may request filing and submission on a monthly basis. It is expected that the filing period chosen has to be complied with for at least one tax period (12 months). While the application for this filing period usually requests rather high input VAT credit positions on a regular basis, the SFTA might lower its requirements under the particular circumstances.
- Extended reporting period: Furthermore, the law provides the SFTA with the option to allow taxable businesses on application, in justifiable cases, to apply other reporting periods, subject to the conditions outlined by the SFTA. The SFTA has not published any further specification as to how such extended reporting period may be possible. In case of a rather low input VAT credit position and a rather high VAT amount payable by the business, it might be an option to approach the SFTA and discuss the adjustment of filing period within one tax period (12 months) to, for example, six months.
2. Payment of VAT refunds
As pointed out above (see 1.1.), the payment of VAT debts has to be made within 60 days after the filing period concerned. The same applies in case of a credit balance of the business, i.e. the SFTA is obliged to pay out the VAT credits within 60 days after receipt of the VAT return, otherwise refund interest of 4% will be due in favour of the business. While the SFTA does currently, as one immediate measure, not levy any interest on late payments after the expiration of the 60 days, it is possible that the SFTA will try to repay the VAT refund at their earliest convenience under consideration of the administrative efforts and resign from their right to wait for 60 days for the pay-out.
3. Request for tax abatement
The SFTA may on request of the business consider a full or partial abatement of bindingly assessed VAT. However, the cases for which such request can be filed based on legal provisions are limited to errors caused by excusable reasons, errors due to not observing formal regulations, and for VAT assessments of the SFTA which are claimed to be too high. The law does not provide for a tax abatement based on other reasons, i.e. based on the best judgement of the SFTA. While the tax abatement will remain limited to those cases and to the rather strict requirements applicable today, it is possible that due to the extraordinary circumstances, the SFTA may review the abatement requests of those businesses falling within the scope of the legally defined cases with a more favourable approach.
4. VAT debt enforcements
In principle, the submission of an application for an agreement on payment facilities does not lead to the suspension of enforcement proceedings. The enforcement proceedings will, however, be ceased in case of approval of the request. The same applies in case of a request for tax abatement.
In light of the current circumstances, the federal government has suspended the possibility to start debt enforcements in Switzerland for the period between 19 March 2020 to 4 April 2020.
The suspension may be extended at a later stage.
BeatBaumgartnerPartner Attorney at law, Swiss certified tax expert
Beat Baumgartner, attorney at law and Swiss certified tax expert, is a partner in our Zurich office. He focuses on Swiss and international taxation, M&A, financing and capital market transactions.T: +41 43 434 67 10 M: +41 79 930 63 52 E: firstname.lastname@example.org