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Zytglocke

Swiss VAT liability

of foreign based companies

The information hereafter is only general of nature and is not meant to be used as sole basis for performing transactions or evaluation of Swiss VAT consequences of planned or performed transactions.

What does Swiss VAT liability imply?

A foreign company that is liable for purposes of Swiss will have to charge Swiss VAT on transactions that are taxable in Zwitserland/Liechtenstein; will have to issue Swiss VAT compliant invoices; will have to keep a bookkeeping of the relevant business transactions and other VAT relevant recordings; will have to retain documents regarding all bookkeeping recordings; will have to file periodically (as a standard quarterly) VAT returns and pay the VAT due on the VAT return; will have to disclose the information requested by the Swiss tax authorities.

Build a flourishing Swiss business

A Swiss VAT registration can be the impetus for building a flourishing Swiss business, notwithstanding the fact that the foreign company is based outside Switzerland nor does have an infrastructure in Switzerland. Various foreign based clients of VAT plus have over the years been able to expand their Swiss business impressively. These success stories all have two important characteristics: one, their success is durable, in a substantial number of cases already more than 10, 15 or even 20 years. Secondly, these successful foreign companies were from the start committed to implement the Swiss VAT, customs and trade law compliance professionally in their business processes. The latter is where VAT plus came respectively comes in.

Basic principle of Swiss VAT liability

Generally, every foreign based company that is doing business in Switzerland will likely be subject to Swiss VAT and will have to register for purposes of Swiss VAT. If not compulsory liable for Swiss VAT purposes, a foreign company may have the option to register voluntarily when certain conditions are met.

The concept of what is often called "reverse-charge" is far less (i.e. only in a very few limited cases) applied under Swiss VAT as in comparison to VAT systems of other countries.

Consequenty, when thinking of Swiss VAT, a foreign company should not start the determination of its Swiss VAT position with the expectation that the recipient of the foreign company's Swiss supply will be the person who will have to take care of the Swiss VAT due for that transaction.

  • Basically, every foreign company will face Swiss VAT liability when it
  • - has a global annual turnover of more than CHF 100'000, and
  • - performs taxable transactions that fall within the scope of Swiss VAT (the Swiss provisions about the so-called place of transaction determine whether the Swiss VAT regulations apply on a specific transaction), and
  • - based on the Swiss VAT provisions about the so-called "taxable person" the foreign company is deemed by law to be liable for Swiss VAT.

Compulsory or voluntary VAT liability

The regulatory framework regarding Swiss VAT liability in connection with domestic transactions distinguishes between entrepreneurs that have an obligation to register for purposes of Swiss VAT and entrepreneurs that do not have such an obligation but are nevertheless entitled to register freely for purposes of Swiss VAT. The difference is not without consequences and determines, among other, for whom and at what moment the Swiss VAT liability starts ipso iure (i.e. by law) respectively can start at the earliest occasion.

Compulsory VAT liability

Foreign companies that fulfil the requirements of the aforementioned basic principle of Swiss VAT liability will have to register for purposes of Swiss VAT within 30 days from the moment the conditions for compulsory VAT liability have been met.

A wide range of activities performed by foreign companies may or will induce a Swiss VAT liability, whereas as such can be mentioned (not exhaustive):

  • - construction work on a location in Switzerland, for example as main contractor or subcontractor;
  • - supply of movable goods from abroad to Switzerland (= import) in combination with installation or assembly in Switzerland by / for account of the foreign supplier;
  • - supply of movable goods, purchased in Switzerland/Liechtenstein, with (according to the Swiss VAT rules) place of supply within the Swiss tax territory;
  • - supply of movable goods from abroad to Switzerland (= import) to be installed in immovable property located in Switzerland;
  • - work on immovable property located in Switzerland, in which scope material to be used is imported into Switzerland;
  • - work on immovable property located in Switzerland, without import of material to be used, supplied to a Swiss VAT registered recipient/customer that does not declare that work on goods (performed by the foreign entrepreneur) as acquisition in its Swiss VAT return;
  • - supply of software in combination with installation, configuration, testing or similar, on location in Switzerland;
  • - work on goods on a location in Switzerland, for example scaffold building, assembly of stages, maintenance or repair work;
  • - supply of architectural services in connection with real estate located in Switzerland;
  • - supply of digital services to nontaxable persons (i.e. private persons or entities that are not registered for purposes of Swiss VAT);
  • - till end of 2024: holding of events in Switzerland, provided not qualifying as rendering of supplies that are exempted of Swiss VAT. The person who, in his own name, announces and organises an event to visitors or attendees is deemed to be the event organiser, as well as is the person who commissions one or more organisers to organise an entire event or parts thereof.
  • - the renting out of movable goods in Switzerland, whereas the goods are not imported in the scope of the execution of the rental agreement;
  • - the renting out of a Swiss based server colocation for sole use;
  • - recharging as such of supplies of goods of services, when these according to the rules of place of supply of goods respectively services are subject to Swiss VAT.

Voluntary VAT liability

Foreign companies that do not fulfil the requirements for compulsory Swiss VAT liability may still wish to opt for voluntary VAT registration. Typically, a voluntary VAT liability must be seen in connection with transactions that qualify as supplies of goods.

As a rule, the option of voluntary VAT registration is not open to foreign companies that render services to Swiss based recipients, when according to the Swiss rules about the supply of services respectively about the taxable subject these services are deemed acquisitions of services.

Consequently, for example a foreign based lawyer or consultant who renders services that are typical for his business sector qualification (i.e. legal services, consultancy services) to Swiss based customers, cannot register voluntarily for purposes of Swiss VAT. The need for such VAT registration does not exist.

For a foreign company who is involved in supplies of goods that are delivered from abroad to Switzerland, the basis for his voluntary Swiss VAT liability is formed by the so-called statement of subjectivity abroad ("Unterstellungserklärung Ausland").

With the "Unterstellungserklärung Ausland" the foreign company commits itself to act as importer of goods coming from abroad and to charge the Swiss VAT due on the so-called subsequent domestic supply to the customer in Switzerland/Liechtenstein. As (voluntarily) Swiss VAT registered taxable subect, the foreign company is entitled to deduct the Swiss VAT at import -under the conditions for deduction of Swiss input VAT.

The "Unterstellungserklärung Ausland" allows the foreign company to refrain from acting as importer in individual cases, provided certain procedural compliance steps are taken. In that case the customer itself will act as importer, meaning that for that specific transaction the foreign company will not charge that customer Swiss VAT.

A foreign company that, despite being in possesion of a"Unterstellungserklärung Ausland", does in all or some cases not act as importer for Swiss VAT purposes but nevertheless charges its customers Swiss VAT, should keep in mind that those customers may have legal standing to claim the irregularly charged Swiss VAT back. Depending the law of the country in which the foreign company is established, the irregular charging of Swiss VAT may also have criminal law consequences for the foreign company, as well as for other persons who enabled the irregular charging or did nothing to prevent it despite of having knowledge -including could or should have known- of the irregular charging of Swiss VAT.

Swiss VAT at import

Basically, every good that enters the tax territory of Switzerland (and Liechtenstein) falls within the scope of VAT at import. Consequently, every commercially dispatched good that crosses the border will induce a customs import declaration, even when the actual due amount of VAT at import is zero. Immamently tied to the need for a customs declaration at import is the question who will be entitled to act as importer.

Companies, foreign as well as Swiss companies, tend to ignore that the quality of importer is subject to technical VAT rules. Thus not always every person who would like to act as importer can indeed act as importer for Swiss VAT purposes.

Decisive for the quality of importer for purposes of VAT is for whom -seen from a VAT technical point of view- the goods at the moment of their import are destined for. Thus standardly, the importer of goods that are sent from abroad to a recipient in Switzerland will the recipient.

However, when goods are sent from abroad to a recipient in Switzerland and these goods -by or for account of the supplier- need to be installed, assembled or similar on the place of their destination in Switzerland, then only the supplier can act as importer.

Tricks like splitting the supply in an invoice for material (to be imported) and a separate invoice for installation, with the aim of having the Swiss recipient acting as importer and to prevent the Swiss VAT liability of the supplier, is not only false but also higly ignorant. In such a case the recipient will not be entitled to deduction of the levied Swiss VAT at import in its Swiss VAT return.

A foreign company that is in possession of the "Unterstellungserklärung Ausland" is entitled -actually has committed itself thereto- to act as importer for purposes of Swiss VAT. Consequently, when such a foreign company send goods from abroad to a recipient in Switzerland/Liechtenstein, that foreign company will -in line with its "Unterstellungserklärung Ausland"- act as importer, unless he has waived procedurally properly the application of acting as importer himself for the particular supply.

Fiscal representation, posting of security

A foreign company that registers for purposes of Swiss VAT -regardless whether for reasons of compulsory or voluntary VAT liability- will have to appoint a Swiss based fiscal representative. The latter is stipulated by the Swiss VAT regulatory framework not to make the lives of foreign companies more difficult, but instead for legal reasons of administrative law and international law.

Furthermore, in the scope of the Swiss VAT registration, foreign companies will have to post a security on behalf of the Swiss tax authorities. By standard, the security is 3% of the estimated Swiss turnover for the next 12 months, with a minimum security of CHF 2'000/CHF 3'000 depending the evaluation by the Swiss tax authorities.

The security, which can be a deposit or a bank guarantee issued by a Swiss bank, is kept by the Swiss tax authorities (free of interest) as long as the Swiss VAT number is active. The security will be returned after deactivation of the Swiss VAT number, and the receipt of the payout can actually take several months after the end date of the VAT registration.

Compliance costs and price setting

Foreign companies that will or consider to register for purposes of Swiss VAT should bear in mind that they include the compliance costs (mainly costs of setting up the registration and the periodical costs of fiscal representation) in their price setting. Consequently, foreign companies should have an idea of the Swiss VAT compliance costs before they make a price offer to or price arrangements with their customers.

A foreign company that is not aware of the Swiss price level or is not willing or able to bear the compliance costs that come with a Swiss VAT registration, should carefully consider whether it is indeed a good idea for that company to access the Swiss market, and instead consider other opties like using a local agent or opt for constructions like a commission agent scheme.

VAT filing

Foreign companies that are registered for Swiss VAT purposes will have to submit periodical VAT returns. Till 31 December 2024 this means that foreign companies normally will submit quarterly VAT returns.

As of 2025 SMEs (small and medium enterprises) will be allowed upon request to submit annual VAT returns, whereas the (estimated) VAT will have to be paid in advance in instalments. In our opinion, this might be interesting for smaller companies with a Swiss turnover of up to CHF 100'000 annually, or companies that do not have every quarter turnover to report.