Tax liability, relevant turnover, commencement of tax liability, registration
A business with its headquarter in Switzerland is generally liable to tax if it:
- independently performs a professional or commercial activity,
- acts externally under its own name and
- has the aim of sustainably earning income from supplies of goods and services.
If one of following turnover limits is exceeded in the process, we strongly recommend checking whether mandatory tax liability applies by completing the Questionnaire (registration):
- For non-profit, voluntarily-run sporting or cultural associations: at least CHF 150,000 turnover from supplies of goods and services in Switzerland and abroad which are not exempt from tax without credit.
- For charitable institutions: at least CHF 150,000 turnover from supplies of goods and services in Switzerland and abroad which are not exempt from tax without credit.
- For public bodies: at least CHF 100,000 turnover from taxable goods and services for persons other than public bodies;
- For businesses not yet mentioned: at least CHF 100,000 turnover from goods and services in Switzerland and abroad which are not exempt from tax without credit.
- The organisation of a one-off sporting, cultural or festive event (lake festivals, village fairs, yodelling festivals, equestrian events, etc.) with budgeted taxable receipts of at least CHF 100,000 from catering services, sales stands for food, advertising, sponsorship etc.
If none of the defined turnover limits is reached, a business may voluntarily submit to tax liability (see "Waiver of exemption from tax liability").
Tax liability for businesses with their headquarters abroad:
In principle, the same conditions apply as for domestic businesses (see above). However, foreign businesses can become liable to tax only if they supply goods or services in Switzerland. They are also exempt from tax liability if they provide only certain goods or services in Switzerland (e.g. goods or services exempt from tax with credit). If goods or services are provided in Switzerland, we recommend that you complete the Questionnaire (registration) in order to check the business's tax liability.
Foreign businesses' permanent establishments in Switzerland:
The same rules apply as for businesses with their headquarters in Switzerland, i.e. they are considered to be independent taxable entities and, depending on the amount of turnover, are liable to tax. If a foreign business has more than one permanent establishment in Switzerland, these are grouped together and considered to be one independent taxable entity.
Goods and services which trigger mandatory tax liability
In order to determine the turnover limits, revenue generated with the following goods and services is to be taken into account:
- the domestic supply of taxable goods and services,
- the supply of goods and services abroad, if these would be taxable had they been supplied domestically,
- the domestic supply of goods and services which are exempt from tax with credit.
In order to determine the turnover limits, the following revenue and cash flows should not be taken into account:
- domestic revenue from goods and services exempt from tax without credit,
- revenue from the supply of goods and services abroad which would be exempt from tax without credit had they been provided domestically,
- receipts which were not generated by supplying goods or services (non-considerations in accordance with Art. 18 para. 2 of the VAT Act, e.g. donations, subsidies),
- receipts generated in the non-business area.
Waiver of exemption from tax liability (voluntary tax liability)
If the turnover thresholds from supplies of goods and services which are not exempt from tax without credit are not reached according to the "Tax liability" Title, the legal entity engaged in business can still register as a taxpayer. This applies to foreign businesses only if they supply goods or services on Swiss territory.
Voluntary tax liability is possible for the beginning of a tax period at the earliest.
Option for the taxation of goods and services exempt from tax without credit
Goods and services which are exempt from tax without credit can, in principle, still be invoiced with VAT included (option). However, this option is not possible:
- for certain goods and services in the insurance field (Art. 21 para. 2 no. 18 of the VAT Act),
- for various forms of turnover in the field of financial transactions (Art. 21 para. 2 no. 19 of the VAT Act),
- for turnover in betting, lottery and other games of chance involving wagers, to the extent they are subject to a special tax or other duties (Art. 21 para. 2 no. 23 of the VAT Act),
- for businesses which apply net tax rates or flat tax rates.
If the following goods and services are used by the recipient exclusively for residential purposes, the option is also not possible:
- transfer and creation of rights in rem in immovable property (e.g. sale of a single family house or apartment building for residential purposes) or goods and services of communities of condominium owners (Art. 21 para. 2 no. 20 of the VAT Act),
- provision of immovable property and parts of immovable property for use or exploitation (Art. 21 para. 2 no. 21 of the VAT Act), e.g. letting an apartment to a private individual for residential purposes.
How does the option work?
The taxation of goods and services exempt from tax without credit is opted for if VAT is clearly shown on invoices or receipts (e.g. the 2.5% tax rate is indicated on a cinema ticket) or declared in the VAT return.
Commencement of voluntary tax liability
principle, tax liability for domestic businesses begins with the commencement
of the business activity. For foreign businesses, tax liability begins the
first time goods or services are supplied on Swiss territory. However, if the business
is exempt from tax liability or from the obligation to register, it will be
entered in the VAT register only on request. For domestic businesses, voluntary
registration may be made at the earliest for the beginning of the current tax
period. For foreign businesses, voluntary registration is possible at the earliest
when the first goods or services are supplied domestically and only within the
same tax period.
Commencement of mandatory tax liability
For domestic businesses that commence their activity or extend their business activity by taking over a business or opening a new business division, mandatory tax liability begins with the commencement of this activity, if at the time it is to be assumed based on the circumstances that the relevant turnover threshold will be reached within the following twelve months. Existing domestic businesses which were previously exempt from tax liability will imperatively become liable to tax after the end of the financial year in which the relevant turnover threshold was reached.
Foreign businesses which supply goods or services for the first time on Swiss territory will imperatively become liable to tax if at the time it is to be assumed based on the circumstances that the relevant turnover threshold will be reached within the following twelve months. Foreign businesses which have previously supplied goods or services domestically will become liable to tax after the end of the financial year in which the relevant turnover threshold is reached.
Termination of tax liability
For domestic businesses, tax liability ends with the termination of the business activity or, in the case of the liquidation of assets, with the conclusion of the liquidation process. For foreign businesses, tax liability ends at the end of the calendar year in which the last goods or services were supplied on Swiss territory (this is the case when no further domestic goods or services will be supplied before the end of the calendar year and it can be assumed with a high level of probability that no domestic goods or services will be supplied in the following calendar year). In both these cases, the taxpayer must deregister with the FTA in writing within 30 days.
If the qualifying turnover of the taxable person does not reach the turnover threshold of CHF 100,000 and it is expected that the qualifying turnover will not be reached in the following tax period either, taxpayers may exempt themselves from tax liability and be deleted from the VAT register. De-registration is not possible before the end of the first tax period in which the qualifying turnover is no longer reached; failure to deregister is deemed to be a waiver of the exemption from tax liability. Deregistration requests must be submitted to the FTA within 60 days of the end of the tax period in order for these to be accepted.
Notes on the Samnaun and Sampuoir valleys
The valley areas of Samnaun and Sampuoir are outside the Swiss customs territory and are considered foreign territory for the purpose of deliveries of goods. This means deliveries from or within Samnaun and Sampuoir are either excluded from tax or classified as deliveries made abroad.
However, in terms of services, the valley areas of Samnaun and Sampuoir are deemed to be part of Swiss territory. This means services provided to or in Samnaun and Sampuoir (e.g. hotel and restaurant services or advisory services) are subject to tax.
Notes on the Principality of Liechtenstein
Businesses with their headquarter in the Principality of Liechtenstein which become liable to tax should contact the Liechtenstein tax administration at the following address:
Last modification 01.05.2018