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What is Value Added Tax (VAT)?

The Confederation shall levy a general consumption tax based on the system of net all-phase taxation with input tax deduction (Value Added Tax). The purpose of the tax is to tax non-business end use in Switzerland and Liechtenstein.

As Value Added Tax, it levies:

  • a tax on supplies rendered against consideration by taxable persons in Switzerland and Liechtenstein (domestic tax);
  • a tax on the acquisition of supplies from undertakings with their place of business abroad by recipients in Switzerland and Liechtenstein (acquisition tax);
  • a tax on the import of goods (import tax).

Tax liability

Every independent undertaking performing entrepreneurial activity is liable to tax. However, the law provides tax exemption for businesses not reaching an annual turnover of CHF 100'000, (respectively CHF 150'000 for non-profit organizations). Therefore a distinction must be made between entreprises liable to pay tax and entreprises waving tax exemption.

Acquisition tax

If a service is provided by a company having its registered office abroad, the domestic recipient is liable to pay tax on the services provided. If the domestic recipient is not already registered as a taxpayer based on the domestic turnover, then the recipient becomes liable to pay tax if the services provided exceed CHF 10,000 annually.

Import tax

On the importation of goods, tax is levied on the value of the imported goods, including all taxes and costs that arise up until the goods reach their initial destination in Switzerland. In travel and cross-border traffic, the exported goods are exempt from VAT (zero-rated). For further details, please contact the Federal Customs Administration (www.ezv.admin.ch ).

Tax rates

Not all services are taxed at the same rate. The standard rate of 8% applies to most goods supplied and to nearly all services. Basic necessities, mainly food and drink (excluding alcoholic drinks), medicines and also certain newspapers, magazines and books, are taxed but only at the reduced rate of 2.5%. Finally overnight stays including breakfast are subject to the special rate of 3.8%.

Tax exemption

A whole range of services are exempt from VAT, as in the field of health, social services, teaching (education), culture, money and capital transactions (however, asset management as well as debt collection are taxable), insurance, leasing of property and the sale of property. Whoever provides such services, however, has no right to input tax (tax-exemption without credit or pseudo-exemption), even if this person is liable to tax on account of other taxable turnovers. Under certain conditions providers of such services may opt for voluntary tax liability

Goods supplied abroad are also in principle liable for taxation. The same applies to services which are considered to be supplied abroad. Meanwhile such operations are tax-exempt provided that the required proof can be provided. In contrast, the services not liable to be taxed, the service provider liable to be taxed may in this case operate the input tax deductions (turnover tax-exempt with credit).

Notes

Due to the fact that VAT is intended to be born by the consumers, normally it is passed on to them in the retail price or noting it separately on the invoice. However, only VAT registered suppliers may indicate this tax in their invoices.

The legal basis for VAT is the Federal Law of June 12 , 2009 concerning Value Added Tax.


Contact a specialist Value Added Tax VAT
Last updated on: 06.02.2014

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