VAT in Switzerland

The current VAT system was introduced in Switzerland in 1995.  At the moment it is placed under the guidance of the Federal Tax Administration, that established the rules related to the returns, compliance and registration of Swiss VAT for non-resident traders. Foreign companies from EU member countries that wish to buy, sell and import goods in and from Switzerland will have to register for VAT as a non-resident trader. The VAT is collected on all sales - even for raw materials. 

What is the VAT in Switzerland?

When opening a Swiss company, entrepreneurs must take into consideration that following the company registration procedure, the respective firm must also be VAT registered.

Switzerland is renowned for having the lowest VAT in Europe, rating 8% since 2011. Also, if trading certain supplies and services such as food, medicine, newspapers and books companies will benefit from VAT reduced rates of 2.5%. VAT for accommodation is 3.8%, while public health, education and social and financial services are exempt from VAT. The VAT Office will require local businesses to have an UID number, which is also used by the local customs authorities for Swiss businesses exporting goods. Foriegn businesses importing goods here will have to use their EORI number in Switzerland.  

Since it is not a part of the European Union, Switzerland is able to set its own VAT rates without being compelled to follow the guidance on rates (a standard rate of 15% or above).  All providers must charge the appropriate VAT rate, collect it and the tax for onward payment to the Swiss tax authorities through a VAT filling

Foreign companies operating in Switzerland must follow the local rules on VAT:

• ·         They must use of approved foreign currency rates.
• ·         Process the necessary corrections
• ·         Send the correct and detailed invoices to customers according to Swiss VAT laws
• ·         The electronic invoices must contain  signature, authenticity and recipient’s agreement
• ·         Maintain records for at least 10 years

VAT registration in Switzerland

In 2010 Switzerland has adopted the EU rules regarding the use of the reverse charge and since then the list of companies offering services that require VAT registration is much shorter.

Companies that must register for VAT are those that:

• ·         Import goods in Switzerland.
• ·         Buy and sell goods within the country.
• ·         Make online commerce for Switzerland consumers. Contact our company formation specialists in Switzerland for more details on this topic.
• ·         Storage goods in a warehouse until resale
• ·         Organize shows and live events with an entrance fee
• ·         Are provided with services in Switzerland under the reverse charge rule (even if they are non-VAT traders)

Before registering for VAT, the company itself must be registered at the Commercial Registry. After that, it can fill in an application at the Local Federal Tax Administration office or send it online. The procedure is completed after the authorities assign the company a tax number called UID (Unternehmens-Identifikationsnummer).

VAT refund in Switzerland

All profits made in Switzerland are VAT taxable. Companies that pay VAT in Switzerland are offered the possibility to obtain refunds by the Swiss Government. VAT refunds are obtained only once a year by certain foreign companies – not all are entitled to it. The amount can be recovered by submitting an application signed by the business owner to the Federal Tax Administration of Switzerland before the 30th June of the following year. He must provide original invoices and proof of VAT registration in Switzerland. If evidence is accepted, the business owner will receive the refund within 6 to 9 months.

VAT refunds are also possible for persons that buy goods for deportation. In order to receive the VAT refund, they must present receipts for the purchased goods and preferably proof of deportation, to a Switzerland VAT Refund Station. These are often found in airports, tourist offices, or international travel hubs.

Intra-community VAT in Switzerland

Switzerland is a member of the Economic Free Trade Association (EFTA) and therefore, the economic relations between Switzerland and EU countries are stipulated under similar tax laws. Whether the provider of goods and services is a member of the EU or Switzerland, he will pay the VAT in the country in which the consumer is located. There are some exceptions that apply to electronic, telecommunications, broadcasting, catering, education or culture areas.

For more information regarding the VAT tax or other special taxes in Swiss cantons please contact our accountant in Switzerland.