Switzerland is famous for its financial stability and is considered a tax haven for foreigners. This is the reason Switzerland has witnessed an enormous amount of funds flowing in and out of the country. The Swiss government recently revamped the VAT law of the country. This was done to ensure that every individual of Switzerland supports the country’s government financially.
The matters are simplified further as each consumer will not have to report these taxes. The companies will pass on the taxes to the consumer in the form of Value Added Tax which is included in the purchase price.
If you are a novice and are looking to understand the basics of VAT in Switzerland, keep reading further.
Vat Rates in Switzerland
There is a difference in the various rates of goods and services in Switzerland.
Switzerland VAT Rate
Standard Rate (Cars, watches, jewellery, clothing, alcohol and other services)
Special Rate (Overnight stays in hotels including breakfast)
Reduced Rate (Foodstuffs, books, newspapers, medicines, other everyday consumer goods)
A standard rate of 7.7% applied to most of the goods and services in Switzerland. If you stay in any hotel overnight and have breakfast in the morning, a special VAT rate is charged at 3.7%. Some of the goods like books, newspapers, alcoholic beverages etc. are charged at a reduced rate of 2.5%.
Who Needs to Register for VAT in Switzerland?
Any foreign company whose taxable transactions reached CHF 100,000 (which is approximately €85,000) had to get itself registered with the FTA in Switzerland. This was before the recent amendments in the VAT law in Switzerland.
According to the VAT law, if the company has a global turnover of more than CHF 100,000, then the company will be subject to VAT. This amendment will have a huge impact on the prospective companies which want to conduct business in the country.
Now let’s understand how a company can register for VAT in Switzerland
Steps for VAT Registration
Switzerland has an easier registration process in comparison to other countries. Businesses that are eligible to pay VAT should get themselves registered with the Federal Tax Authority (FTA) within a span of 30 days from the beginning of the tax liability. The steps to register for VAT are:
1.Review VAT Position of your Company
Before a company in Switzerland registers for VAT, it needs to know and understand if it is eligible for Registering for VAT. There is also an option for voluntary registration for the company. Any company which is able to achieve the threshold of CHF 100,000 or more must apply for VAT within 30 days. This review must take place before the company is subjected to any kind of compulsion with its customers or suppliers.
2.Apply for Registration
After the review, you need to go to the portal and fill in the necessary details in the application form. When the application is filled, it needs to be submitted online. After its submission, a copy of the form can be downloaded immediately. Another form is also generated which needs to have the signature from the foreign company and the Swiss Fiscal Representative and then needs to be sent to the concerned authorities.
After receiving the application, the Swiss Federal Tax Administration will pass judgement on whether the application would be accepted or rejected. If unaccepted, the company will have to fill out the form again. In case the application is accepted, the tax authority will inform the nominated fiscal representative of what would be the amount for the required bank deposit (also known as security). The letter of acceptance from the side of the tax authority will also include a set of rules and regulation which will be applicable to the foreign company.
4.VAT Number Assigned
After receiving the signed form and the security money, the FTA will assign a Swiss VAT Number. The number will be based on the Unique Identification Number (UID). The Swiss VAT number can be verified online.
5.UID Number Verification
After some time of sending the application, the firm will receive a letter from the Swiss Federal Statistical Office which would be confirming the Unique Identification Number of the firm. This letter will also contain the method for accessing the online information about the UID of the company.
6.Issue Compliance Invoice
A foreign company issue VAT compliant invoices only when they have received a Swiss VAT Number. Unless the company receives such number, the foreign company cannot mention or refer to Swiss VAT explicitlywhile issuing an invoice.
Following the above-mentioned steps will get your company registered for VAT in Switzerland.
The VAT is the most followed law all around the world and this law was actually passed earlier in Switzerland and was amended again on 29th September 2016. These amendments were applicable all over the country from 1st January 2018. The changes which were made to the VAT law in Switzerland were aimed to impact the future of the businesses in the country, which would ultimately impact the economy of the nation.
Understanding the intricacies of VAT would be a little difficult for the business in the country. Thus it is recommended that a business should avail the help of a reputed firm which would provide VAT services in Switzerlandand take care of any queries related to VAT or any query about Swiss company incorporation in general.
Business Setup Worldwide would take care of all the problems in the business and will provide you with customized solutions which will help in the further growth of the business. For more details on the various services we provide, do contact us – we would be happy to help