Swiss VAT registration – opting for not registering for Swiss VAT: Practical Considerations
In 2018 the revised Swiss VAT Act came into force and triggered some changes in particular with respect to the Swiss VAT liability. According to the revised Swiss VAT Act, the VAT liability in Switzerland is linked to the world wide turnover of a business instead of only considering the taxable turnover in Switzerland.
In summary, businesses that have a link to Switzerland by either making supplies in Switzerland or having its registered office, domicile or permanent establishment on Swiss territory become liable for Swiss VAT if the business achieves a world-wide turnover of at least CHF 100’000.
In consequence, a business might become liable for Swiss VAT by exceeding the turnover threshold in Switzerland with rendering VAT exempt without credit supplies in Switzerland and taxable supplies abroad, which are from a Swiss VAT perspective thus zero-rated. In consequence, the business would have to register for Swiss VAT including the quarterly submission of the Swiss VAT returns and the appointment of a tax representative for foreign businesses, even though the business does not pay any VAT in Switzerland.
Taking into account these challenges that arose with the new legislation, the legislator included a kind of simplification rule in article 121a Swiss VAT Ordinance. According to article 121a of the Swiss VAT Ordinance, Swiss established as well as foreign based/ non-Swiss established businesses which exclusively provide Swiss VAT exempt without credit supplies on Swiss territory and which thus qualify for Swiss VAT liability may opt for not registering as taxable person with the Swiss Federal Tax Administration (SFTA). Under this provision, non-Swiss established businesses can additionally benefit from the regulation of article 121a Swiss VAT ordinance, if they generate not only turnover from VAT exempt without credit but also from zero-rated supplies (cf. article 10 para. 2 lit. a Swiss VAT Act).
However, the SFTA might specify the conditions of article 121a Swiss VAT Ordinance. According to a non-published administrative practice of the Swiss Federal Tax Administration, the option of article 121a Swiss VAT Ordinance cannot be applied in case that the business concerned acquires also services subject to Swiss acquisition tax. It remains to be seen if, how and when that practice might be published by the SFTA and how the impact actually might be. For the time being it is recommendable to duly assess a potential VAT liability in Switzerland.
How can we support you?
We regularly assist our clients in reviewing the potential VAT position of their business. In case your business is active on the Swiss market without being registered for Swiss VAT, we are pleased to support you in that regard.
Beat BaumgartnerPartner 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