Value added tax is an indirect tax levied by the Confederation on the basis of Art. 130 of the Federal Constitution. As of 1 January 1995 it replaced the goods turnover tax (WUSt) levied until then. The VAT is structured as an all-phase tax with input tax deduction.
Since 1 January 2024 the rates are 8.1% standard rate, 2.6% reduced rate and 3.8% special rate for lodging services.
With the exception of the mail order provision (Art. 7 Para. 3 Let. b VAT Act), the partially revised Value Added Tax Act (VAT Act) and the partially revised Value Added Tax Ordinance entered into force on 1 January 2018.
Tax system in general Value added tax is structured as an all-phase tax with input tax deduction. If a taxable person provides a service to another taxable person, the former must pay the VAT on the service; the recipient can reclaim the tax paid as input tax from the Federal Tax Administration (FTA), but must also pay tax on his services to his customer. This ensures that systematically only the added value in a value chain is subject to tax.
Domestic consumption is to be taxed. Therefore, supplies within Switzerland are taxed by the taxpayers. Deliveries from abroad are invoiced without Swiss VAT, but import tax and any customs duties and surcharges are levied at customs. The import tax can be reclaimed by taxable persons in the same way as domestic input taxes. Supplies to foreign countries are also not to be taxed. This is achieved through an exemption for deliveries or by the place of performance being abroad.
In this context, the law distinguishes between domestic tax on services provided by domestic entrepreneurs, reference tax on services provided by foreign entrepreneurs to domestic entrepreneurs, and import tax on the import of goods into the country.Art. 1 MWSTG The tax is levied on the import of goods into the country.
Domestic tax Taxable turnovers All supplies made by taxable persons are subject to domestic tax, unless they are expressly exempted from tax:Art. 18 MWSTG
supplies of goods made for consideration in the country; services rendered within the country against payment.
Taxable persons Both legal entities and natural persons or associations of persons can be taxable persons if they operate a business and are not exempt from tax. According to Art. 10 Para. 1 VAT Act, a person operates a business if he or she independently carries out a professional or commercial activity with the aim of generating income on a sustainable basis and appears to the outside world under his or her own name. It is not necessary to also want to make a profit.
One is exempt from tax liability if one does not exceed the turnover limit of CHF 100,000; however, as an entrepreneur, one can also voluntarily subject oneself to VAT. Upon application, several companies can also be treated jointly as one taxable person ("group taxation"). Special rules apply to foreign entrepreneurs and non-profit organizations as well as sports and cultural associations.
Delimitation of domestic and foreign territory The term domestic used in the text of the law does not correspond to the national borders of the Swiss Confederation. Article 18 of the VAT Act defines domestic. The following are considered domestic:
the territory of Switzerland; foreign territories in accordance with treaty agreements. These include the Principality of Liechtenstein and the German enclave of Büsingen am Hochrhein. An exception is the valley communities of Samnaun and Sampuor, which are excluded from the Swiss customs territory. However, the Federal Law on Value Added Tax has stated that this law is nevertheless applicable in the two valleys for services. The two valleys must compensate the federal government for the tax losses resulting from this provision. Savings resulting from the reduced collection effort will be adequately taken into account.
The law defines foreign countries as all territories that are not located within the political borders of the Swiss Confederation or for which one of the exception clauses expressly mentioned in the law applies (entrepôt, duty-free ports, treaty agreements).
Sales qualification Shipments According to Art. 3 VAT Act, a supply occurs when an item is sold. However, the rental of goods (e.g. a vehicle) also constitutes a supply, even if the goods are returned at the end of the rental period. Furthermore, the processing of buildings and the processing of objects (production) are treated as supplies. Processing does not necessarily require adding or adding components. Washing clothes, for example, also constitutes a supply. In addition to movable and immovable goods, refrigeration, heat, electricity, gas and the like are also considered to be goods. The term "supply" is thus defined much more broadly in the VAT Act than, for example, in the EU. This approach is partly due to historical reasons and corresponds to the practice of the former WUST (goods turnover tax).
Examples: Selling edibles, e.g., at the bakery, cleaning the car at the car wash, changing a seal on a water pipe, selling software on a floppy disk, harrowing or plowing the ground, ironing shirts, dog grooming services.
Services According to Art. 3 of the VAT Act, all services that do not constitute deliveries are considered to be services. Explicitly mentioned are also sales of intangible assets as well as compensation for actions or their waiver or toleration of conditions. Thus, it can be stated that everything that cannot be recorded with a delivery falls under the facts of the service.
Examples: Consumption of coffee and croissants in a café, radio/TV reception subscription, installation of software via data telecommunication, analysis work, provision of personnel, transfer of a patent for further marketing, planning services of the architect for a new building, advertisement in a magazine, mediation of a transaction between two parties, waste disposal service.
Place of taxable turnover Whether a service is taxable depends on the place where the service is performed. Only domestic supplies are subject to VAT. In order to determine the taxability of a service, it is therefore necessary to examine what type of service is involved.
Place of shipment Art. 7 VAT Act determines the place of a supply. The place of supply is the place where:
the good is located at the time of transfer of the power to dispose commercially of it, of its delivery or of its being made available for use or exploitation; transport or dispatch of the good to the customer or to a third party on his instructions begins.
This means that the rental of a car is taxable where the delivery of the car takes place. Similarly, supplies of construction work are taxable where the construction work is located. Thus, if a Swiss construction company builds a house in Vorarlberg for a Swiss customer, this turnover is not subject to Swiss VAT.
Place of the service Art. 8 para. 1 VAT Act determines the place of a service. Unless the law provides for an exception, the place of residence or place of business of the recipient is deemed to be the place where the service is provided.
Art. 8 para. 2 VAT Act determines a different place of performance for the following services:
for services provided to physically present natural persons: the place where the person providing the service has his registered office or a permanent establishment; for services provided by travel agencies and event organizers: the place where the person providing the service has the registered office of the economic activity; in the case of cultural, artistic, sporting, scientific, educational, entertainment or similar services: the place where these activities are actually carried out; for hospitality services: the place where the service is actually provided; in the case of passenger transport services: the place where the transport actually takes place, measured in terms of the distance covered; for services related to a real property (management or appraisal of the real property, services related to the acquisition or creation of rights in rem in the real property, and services related to the preparation or coordination of construction works such as architectural and engineering works): the place where the real property is located; for services in the field of international development cooperation and humanitarian aid: the place for which the service is intended.
Thus, if a marketing company provides advertising services for a German customer in Switzerland, the place of performance is deemed to be abroad, which means that the advertising service is invoiced without Swiss VAT.
Reference tax If a Swiss customer purchases a service from abroad (for example, software from a German server) or a supply that is not subject to import tax (for example, foreign personnel for work on the customer's own machines), this service does not physically cross the border. In order not to disadvantage domestic service providers, it must be ensured that the foreign service is also subject to tax. This is done in such a way that the domestic recipient of a service settles the purchase with the FTA (reverse charge procedure). Therefore, taxable persons must account for all purchases of affected services from abroad with the FTA (purchase tax), but may claim the input tax deduction. Non-taxable persons (for example private individuals) must report to the FTA if their purchases of such services exceed CHF 10,000 per year. The tax administration will then send them a corresponding invoice (ruling). However, this procedure only leads to a limited tax liability for these persons (without the right to deduct input tax).
Import tax Imports of goods into the Swiss customs area are also subject to VAT by customs. The taxable amount is normally the consideration for the goods, otherwise the market value (Art. 54 para. 1 VAT Act).
In general, all postal consignments that have not been dispatched from the Swiss customs territory are also subject to tax. For reasons of administrative economy, tax amounts up to 5 Swiss francs are not levied. This tax amount corresponds to an assessment basis of 62 Swiss francs at the VAT rate of 8.1% or 192 Swiss francs at the VAT rate of 2.6%. An exception to this rule is made for the importing of consignments marked as gifts, for which a limit of 100 francs in the value of the goods applies.https://www.post.ch/de/empfangen/importverzollung
Tax rates The rates of value added tax are laid down in Art. 130 of the Federal Constitution. There, the Confederation is granted the right to levy value-added tax on supplies of goods and services, including own consumption, and on imports at a standard rate of no more than 6.5 percent and at a reduced rate of no less than 2.0 percent.
Based on Art. 196 No. 3 Sentence 2 Letter e of the Federal Constitution, the Confederation is permitted to levy a further 0.1 percentage points for the financing of large-scale railroad projects.Verordnung zur Anhebung der Mehrwertsteuersätze zur Finanzierung der Eisenbahngrossprojekte (PDF; 12 kB) The Confederation was also authorized, in the form of a federal law, to increase the standard rate by a maximum of one percentage point and the reduced rate by 0.3 percentage points for the financing of the development of the old-age structure for the AHV/.
Based on the defined basic features for the design of the Federal Law on Value Added Tax in the Federal Constitution, the standard rate (7.7%) was composed as follows:
7.6% to levy a standard rate for supplies of goods and services 0.1% for the financing of large-scale railroad projects (NRLA)
Until the end of 2017, additional VAT financing of the IV by 0.4 VAT percentage points applied and from 1 January 2018 VAT rates increased by 0.1 percentage points due to the financing of the railroad infrastructure expansion FABI. From then, the normal rate of 7.7%, the reduced rate of 2.5%, and the special rate of 3.7% applied.