Switzerland – Amendments to the VAT Act

June 18, 2024

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In December 2023, the Swiss Federal Tax Administration (SFTA) announced that the Value Added Tax Act (VAT Act) would be amended. One of the amendments that has already been effective, starting from January 1, 2024, is the increase of the standard VAT rate from 7.7% to 8.1% and the reduction of rates from 2.5% to 2.6%.

Alongside this change, starting from January 1, 2025, an important novelty shall be introduced concerning the liabilities of the foreign digital platform operators when the place of supply is in Switzerland.

Digital Platforms and VAT Act

The amendment has also introduced a new digital platform concept into the national framework: “Digital platform means an electronic interface that facilitates interaction between two or more users online intending to supply goods or services.”

Following the EU's example, the SFTA introduced the “deemed supplier” concept concerning e-commerce transactions. When the new requisites are met, digital platforms that facilitate the supply of goods by connecting buyers and sellers will be considered “deemed suppliers” for the supplies made by the original vendor.

If one or more of the conditions indicated below are met, the digital platform operator will not be treated as the deemed supplier:

If it’s not directly or indirectly involved in the ordering process;
If it doesn’t generate turnover directly related to the business;
When its role is limited to processing payments in connection with the supply;
When it provides only space for advertisements;
When it solely offers advertising services;
If their function is limited to redirecting or forwarding purchasers to other electronic platforms.

When SFTA demands, as in audit cases, the DPO should provide all relevant information concerning the VAT liability transferred as part of the deemed supplier conditions and related turnover with supporting documents.

SMEs and VAT Act

According to the new rules, small and medium-sized enterprises can also file annual VAT returns, potentially reducing their reporting periodicity. To do this, two conditions must be met:

the annual taxable turnover does not exceed CHF 5,005,000;
the taxpayer must have filed the VAT returns and paid all tax claims fully and on time in the last three tax periods. If the tax liability dates from a shorter period, the SFTA considers the periods since the tax liability began.

The VAT Act obligates all foreign businesses to appoint a tax representative with a domicile or registered office in Switzerland to perform their procedural obligations.

However, the revised Act allows the SFTA to waive the appointment of a tax representative if other means of facilitating communication with the foreign taxpayer are in place.

Conclusion

The revised VAT Act brings many changes, especially to digital platforms. Introducing the concept of a deemed supplier will change the e-commerce sector and impact both digital platforms and sellers operating in Switzerland.

Digital platforms should already assess the impact of the changes and whether they will be considered suppliers.

Source: Swiss Federal Tax Administration (SFTA)

What are the recent changes to Switzerland's Value Added Tax (VAT) rates?

Effective January 1, 2024, Switzerland increased its standard VAT rate from 7.7% to 8.1%. The reduced VAT rate was adjusted from 2.5% to 2.6%, and the special rate for accommodation services rose from 3.7% to 3.8%.

How do these VAT rate changes impact businesses and consumers?

Businesses are required to update their pricing structures, accounting systems, and invoicing practices to reflect the new VAT rates. Consumers may experience slight price increases on goods and services due to the higher VAT rates. It's essential for both businesses and consumers to be aware of these changes to ensure compliance and accurate financial planning.

What amendments have been made regarding digital platforms in the VAT Act?

Starting January 1, 2025, Switzerland introduced the "deemed supplier" concept for digital platforms facilitating the supply of goods. Under this amendment, digital platforms that enable transactions between buyers and sellers are considered the suppliers for VAT purposes, making them responsible for collecting and remitting VAT on these transactions. However, platforms are not deemed suppliers if they are not involved in the ordering process, do not generate turnover directly related to the business, only process payments, provide advertising space, or merely redirect purchasers to other platforms.

How does the revised VAT Act affect small and medium-sized enterprises (SMEs)?

The revised VAT Act allows SMEs with an annual taxable turnover not exceeding CHF 5,005,000 to file annual VAT returns, provided they have fully and timely fnd paid all tax claims in the last three tax periods. This change aims to reduce the administrative burden on SMEs, enabling them to manage their VAT obligations more efficiently.

Are there any changes regarding the appointment of tax representatives for foreign businesses?

Yes, the revised VAT Act permits the Swiss Federal Tax Administration (SFTA) to waive the requirement for foreign businesses to appoint a tax Switzerland if alternative means of facilitating communication with the foreign taxpayer are established. This amendment aims to simplify compliance for foreign businesses operating in Switzerland.

Are there any changes regarding the appointment of tax representatives for foreign businesses?

Yes, under the revised VAT Act, the Swiss Federal Tax Administration (SFTA) has the authority to waive the requirement for foreign businesses to appoint a tax representative in Switzerland. This flexibility applies if alternative measures are in place to facilitate communication between the SFTA and the foreign taxpayer. Such measures may include having reliable systems for electronic communication or establishing other forms of direct contact that ensure compliance and administrative efficiency. This change simplifies administrative obligations for foreign businesses operating in Switzerland.

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