What is the issue?
The partial revision of the VAT Act aims to place foreign mail-order companies on an equal footing with companies domiciled in Switzerland. The current unequal treatment arises from the fact that no VAT is levied on imports of goods (import tax) if the tax amount is CHF 5 or less (so-called small consignments) for collection efficiency reasons. In addition, the delivery of goods is not subject to domestic VAT (domestic tax)1. The buyer of the goods can thus obtain small consignments from abroad without paying any VAT, whereas the same consignment is subject to domestic tax if it is purchased from a domestic mail-order company or retailer entered in the VAT register.
Legal situation up to the end of 2018 and legal situation as of 2019 for mail-order companies with an annual turnover of less than CHF 100,000 from small consignments
New legal situation as of 1 January 2019 with an annual turnover of at least CHF 100,000 from small consignments
If a (domestic or foreign) mail-order company generates at least CHF 100,000 turnover per year from small consignments which it transports or dispatches from abroad, its deliveries2 will be deemed to be domestic supplies. As a result it will be taxable in Switzerland and must be entered in the VAT register. Tax liability arises when the turnover limit of CHF 100,000 is achieved (see Review of tax liability).
As of the time of entry in the VAT register based on the mail-order regulations, not only the small consignments of the mail-order company will be considered as domestic supplies, but also all other consignments where the import tax amount is more than CHF 5. As a result, all shipments to Switzerland are subject to domestic tax in the case of a taxable mail-order company3.
There will still be no import tax on small consignments even with the mail-order regulations.
Mandatory tax liability
Tax liability, registration and deregistration
Review of tax liability
Anyone who achieves a turnover of at least CHF 100,000 in 2018 from small consignments will imperatively be liable to tax as of 1 January 2019 and must be entered in the VAT register if it is to be assumed that such deliveries will also be carried out in the twelve months from 1 January 2019.
If goods from abroad which are exempt from import tax due to the small tax amount are not delivered to Switzerland until 1 January 2019, the place of delivery will be deemed to be abroad until the end of the month in which the service provider reaches the turnover threshold of CHF 100,000 from such deliveries (Art. 4a para. 1 of the VATO). From the following month, the place of delivery for all of the mail-order company's deliveries from abroad to Switzerland will be deemed to be domestic (Art. 4a para. 2 of the VATO). It must then be entered in the VAT register and import goods in its own name.
If the turnover falls below the CHF 100,000 threshold at a later date and this is not reported to the Federal Tax Administration (FTA), it will be assumed that the mail-order company is voluntarily submitting to VAT (Art. 4a paras. 3 and 4 of the VATO; see Procedure).
Registration as a taxable person
Domestic or foreign mail-order companies that meet the requirements for tax liability must register with the FTA independently. Foreign mail-order companies must have a tax representative resident or domiciled in Switzerland (Art. 67 para. 1 of the VATA). In addition, collateral must be provided by means of unlimited joint and several surety from a bank domiciled in Switzerland or a cash deposit. For more information, see VAT registration.
Procedure for a mail-order company entered in the VAT register
A mail-order company entered in the VAT register owes Swiss VAT (domestic tax) on all deliveries to buyers in Switzerland4. Domestic tax is thus due on both small consignments and shipments that are subject to import tax. By contrast, a taxable mail-order company can deduct import tax as input tax in the course of its for input tax deduction qualifying business activities from the beginning of the tax liability (the mail-order company is deemed to be the importer).
Voluntary tax liability according to "declaration of subjection for abroad"
By means of a "declaration of subjection for abroad", mail-order companies can voluntarily submit to tax liability even before reaching the tax liability turnover limit or before entry into force of the mail-order regulations. This makes it easier for them to plan the changeover. With this procedure, the mail-order company (entered in the VAT register) is the importer and can also claim import tax as input tax. The delivery to the domestic buyer is thus regarded as a domestic delivery (similar procedure to the mail-order regulations; see the next paragraph, however). It can also make sense to use the "declaration of subjection for abroad" if the turnover generated with small consignments is close to the CHF 100,000 turnover limit. Subjection ensures continuity in terms of procedure and tax liability. More information on this can be found under Declaration of subjection for abroad.
As soon as taxpayers who are already in possession of the "declaration of subjection for abroad" meet the requirements of the mail-order regulations (Art. 7 para. 3 lit b of the VATA), they will no longer be able to waive the application of the "declaration of subjection for abroad" in individual cases (Art. 7 para. 3 lit a of the VATA), i.e. they must apply it to all deliveries and are thus deemed to be importers of the goods in each case.
Already taxable companies which also provide shipping or transport services
If a domestic or foreign company is entered in the VAT register due to other supplies provided in Switzerland, and if this company also transports or ships small consignments from abroad to Switzerland, these small consignments continue to be considered foreign turnover. Also in the case of this company, deliveries will not become domestic supplies until the limit of CHF 100,000 per year from such deliveries (small consignments) is reached.
What do taxable mail-order companies and customs declarants5 have to bear in mind?
A taxable mail-order company provides domestic supplies by selling goods that it dispatches or transports from abroad to Switzerland. It charges buyers domestic tax and has to ensure that they are not additionally charged import tax. It is therefore the responsibility of the mail-order company to provide the customs declarant with the information necessary for the customs declaration so that the customs declarant can see that the mail-order company is entered in the VAT register.
If when importing goods with import tax of more than CHF 5 it is not evident that a consignment falls within the scope of the mail-order regulations (or even within the scope of the declaration of subjection for abroad), the buyer of the goods can end up being charged import tax by the customs declarant. This risk must be countered above all in postal traffic, as the consignor and the customs declarant (Swiss Post) have no express contractual relationship with each other in that case. However, attention also has to be paid to this problem in the case of other types of transport (e.g. courier traffic).
To prevent import tax from being passed on to the buyers of goods, it is essential to observe the following points, for which taxable mail-order companies are responsible:
List of taxable mail-order companies
On its website, the FTA provides a list of companies entered as mail-order companies in the VAT register. This list enables companies entrusted with customs clearance to decide whether import tax is to be charged to the recipient of a parcel or to the taxable mail-order company. The list can be made available in XML format to persons entrusted with making customs declarations.
Labelling of consignments (concerns primarily postal traffic)
The parcel must be unambiguously labelled so that it is clear whether import tax has to be invoiced to the mail-order company or the recipient. It is essential for the name and VAT number of the mail-order company to be included on the address label. In addition, a VAT-compliant invoice or a pro forma invoice (Art. 26 of the VATA) stating the domestic tax must be affixed to the parcel.
The customs declarant must know the name, address6 and VAT number of the mail-order company. The mail-order company must provide this information to the customs declarant with the address label and with the invoice to the buyer.
On CN 22/23 postal consignments has to be affixed in addition an address label (name und VAT number of the mail-order company) and a pro forma invoice including Swiss VAT.
Clear customs clearance instructions (concerns primarily courier traffic)
When a dispatch order is issued by the consignor, the courier/haulage company must be informed that the mail-order regulations apply or that this information is to be obtained from the persons entrusted with the customs declaration.
Further recommendations for a smooth process
Opening a CSP account
The opening of an account in the Customs Administration's centralised settlement procedure (a so-called CSP account) makes it even easier for taxable mail-order companies to process transactions. The advantage of this procedure is that customs clearance can be cashless. The assessment decisions are listed daily in the Bordereau der Abgaben (bordereau of levies). The accountholder is provided with the composition and the associated assessment decisions in the form of a digitally signed file, which can be collected online. Information on this can be found on the FCA website: www.ezv.admin.ch → Information companies → Declaring goods → Centralised settlement procedure CSP.
Combining consignments (does not affect postal traffic)7
A further simplification is combining several consignments for different recipients on a single customs declaration. Instead of many individual customs declarations, all consignments combined can be declared with a collective customs declaration. The customs clearance burden is reduced with this measure, which can result in lower costs for the mail-order company as the case may be. Further information on this can be obtained from the FCA.
1 The term "domestic" refers to the Swiss territory, the Principality of Liechtenstein and the German municipality of Büsingen. If Switzerland is referred to below, it is done to improve readability; the term refers to the domestic area in terms of value added tax.
2 Aside from shipping deliveries, transport deliveries are also relevant, but not pick-up deliveries. This means that deliveries trigger tax liability where the supplier provides transport to the buyer or to a place determined by the buyer, or mandates a third party to do so.
3 Aside from the aforementioned deliveries, all other taxable domestic supplies are also subject to domestic tax.
5 Concerning customs declarants cf. Art. 26 of customs law of 18 march 2005 (SR 631.0).
6 If the mail-order company’s billing address doesn’t correspond with the registered address, it’s necessary to declare both addresses on the invoice to the customer.
7 In connection with postal consignments according to the UPU Convention the collective customs declaration is inapplicable.
Last modification 13.12.2018