Switzerland - VAT Reform Approved by the Federal Council

In a VAT news article published a few months ago, we explained the proposed amendments to the VAT Act and their effects on digital platforms. Now, the Swiss Federal Council has enacted these amendments, bringing the Swiss VAT framework closer to modern trends and more suitable for the challenges of the digital economy.

As expected, the amendments will take effect on January 1, 2025.

Key Amendments to the VAT Act

Adopted VAT amendments include simplifying tax compliance for taxpayers registered for the VAT flat rate scheme. This includes eliminating the obligation to record input tax, which may come as administrative relief for SME businesses.

One of the most significant amendments refers to the definition of digital platforms and their obligation to collect and remit VAT, putting them in the position of a deemed supplier. All digital platforms related to the supply of goods and services must provide all VAT-related information to the Swiss Federal Tax Authority (SFTA) upon the SFTA's request.

Also, the place of supply rules for remote services, such as online training, have been amended, so they will now be taxed based on the recipient’s location. In addition, place of supply rules for on-site cultural, artistic, educational, scientific, sporting, and recreational services have also been changed. According to the new regulations, the place where performance occurs is the place of supply for these services.

The place of supply of services related to travel agencies and similar services provided by the same travel agency also changed. Now, the palace of supply is where the person operating the travel agency has a head office or a permanent establishment, domicile, or the place from which activity is carried away.

Furthermore, adopted VAT amendments include a list of VAT-exempt medical and educational services.

Conclusion

It was clear that previously proposed amendments would be adopted and that changes to the Swiss VAT framework were inevitable. All digital platforms operating in Switzerland had enough time to assess the proposed amendments and determine if they affected them.

However, now that it is obvious that new rules will apply in 2025, digital platforms and other affected parties that did not prepare and make needed changes must make adjustments to comply with VAT rules.

Source: The Federal Council of Switzerland, VATabout