Switzerland – Amendments to the VAT Act

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:

1. the annual taxable turnover does not exceed CHF 5,005,000;

2. 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)