Important Changes to Swiss VAT Rules

Digital Platforms

Starting in 2025, entities who facilitate the sale of goods through digital platforms (or any electronic interface) will be required to play a role in VAT collection.

In fact, entities operating these interfaces are, from January 1st, 2025, under certain conditions, considered to have themselves delivered the goods for the sales they have facilitated. As a result, they will be liable for VAT on these sales when the place of supply is within Swiss territory.

As shown in the diagram above, a fiction is created, establishing two successive yet similar service relationships:

Underlying seller – digital platform (recipient of the service);
Digital platform (new supplier of the service) – recipient of the service.

If the platform is registered for Swiss VAT, the first (fictitious) delivery between the seller and the platform is either considered to be supplied abroad or is tax-exempt. Foreign sellers who only engage in this type of transactions are thus not subject to VAT obligations in Switzerland. For registered sellers making deliveries within Switzerland, the exemption also simplifies interactions with the platform from a formal perspective.

Background

In Switzerland, when the import tax on delivered goods is less than five Swiss francs, the delivery is considered as a small consignment. For these shipments, Swiss customs do not charge import VAT to either the supplier or the importer.

Previous VAT Rules (2019 - 2024)

Since January 1, 2019, foreign suppliers delivering small consignments to Switzerland have been required to register for Swiss VAT if their total sales of these shipments exceed 100,000 Swiss francs annually.

What's Changing on January 1, 2025?

From January 1, 2025, Digital platforms will now be considered the entities responsible for the deliveries, not the individual suppliers.

Implications of the Changes

If a digital platform’s turnover from small consignments in Switzerland exceeds 100,000 Swiss francs, it will have to register for Swiss VAT the following month.
Once registered, the platform will be treated as the importer of goods into Switzerland. It will need to:
- Charge VAT on all deliveries within Switzerland.
- Apply VAT to all subsequent supplies of goods from abroad to B2C customers in Switzerland, regardless of value.
- Pay any applicable import tax, although platforms will generally be allowed to defer payment by declaring it in their VAT returns, thus minimizing cash flow impacts.
Suppliers who use digital platforms and do not meet the Swiss VAT registration criteria on their own will no longer need to register for VAT.

Impact on Service Platforms

While service platforms are not directly impacted by this new VAT rule, they do face additional administrative responsibilities as they must be capable of providing information to Swiss tax authorities on the service providers whose services they resell.

Exemptions

Platforms are not affected if:

They are not involved in the ordering process (neither directly nor indirectly).
They do not generate turnover from activities conducted through the platform.

or if the platform exclusively carries out one of the following activities

The processing of payments related to the delivery of goods; and/or
The placement of advertisements concerning goods; and/or
The promotion of these through advertising services; and/or
The redirection or transfer of buyers to other electronic interfaces where goods are offered for sale, without any further involvement in the delivery.

Key Takeaways and Next Steps

Platforms and suppliers should evaluate their current VAT registration status and assess whether they will be impacted by the new rules.
Ensure systems and processes are ready to handle the VAT charging and reporting requirements starting January 1, 2025.
Platforms should prepare for potential administrative duties, like deferred import tax payments and reporting obligations to Swiss authorities.
Communicate these changes to Swiss customers to maintain a transparent and predictable purchasing experience.

These changes will bring Switzerland's VAT rules in line with the increasing dominance of digital platforms in cross-border commerce, ensuring clearer tax responsibilities and more predictable pricing for Swiss consumers.

For more information and guidance, please do not hesitate to contact us.

Goods and services for which VAT is Partially Reduced or Removed

From 2025, the reduced VAT rate will apply to menstrual hygiene products.

Additionally, the following services will be excluded from VAT:

Travel services resold by Swiss or foreign travel agencies, along with related services (foreign travel agencies will therefore not be subject to VAT in Switzerland for trips they organize within Switzerland);
Active participation in cultural events;
Coordination of care services within the context of medical treatments;
Provision of infrastructure for outpatient services and day hospitals to accredited physicians;
Household assistance and support services provided by private home care and assistance organizations;
Provision of personnel by all non-profit organizations;
Offering and management of investment groups by investment foundations, as defined by the Federal Law on Occupational Old Age, Survivors, and Disability Benefits (LPP).

A specific and detailed review of the services provided that could benefit from this new exclusion is recommended in case of any doubt. We remain at your disposal for any further information on this matter.

Fiscal representative and contacts with the FTA_VAT

To fulfill its procedural obligations, a taxable entity who has neither a domicile nor a registered office in Swiss territory must, in principle, appoint a representative who has their domicile or registered office in Switzerland. The main role of the representative in Switzerland is to provide the FTA_VAT with the means to send requests to the taxable person and to notify them of certain documents (such as a P.O. box in Switzerland). The representative is not jointly responsible for the VAT liabilities of the taxable person.

Starting in 2025, the FTA_VAT may waive the requirement to appoint a representative if the fulfillment of the taxable person’s procedural obligations and the prompt execution of the law are guaranteed in another way.

This option will also be offered to foreign platforms facilitating deliveries within Switzerland. They must request it at the time of registration for VAT purposes and commit to fulfilling all their tax obligations. If necessary, the platform must also ensure that all communication with the FTA_VAT is conducted electronically and in one of the national languages. A representative in Switzerland will, in any case, be required in the event of a VAT audit.

Simplified annual VAT reporting for Small Businesses

From January 1, 2025, businesses with an annual turnover not exceeding CHF 5’005’000 may, upon request, report VAT annually.

To benefit from annual VAT reporting, previous and future VAT returns must be submitted and paid on time.

The request to switch to annual reporting can be made via ePortal starting January 2025. To submit an annual report for 2025, the request must be filed by February 28, 2025. Newly taxable individuals have 60 days after receiving their VAT number to apply for annual reporting through ePortal.

Nothing changes regarding the content of the annual return, allowing for corrective returns, annual reconciliations, or extensions of deadlines. The annual return must be submitted and paid by the end of February of the following year.

Annual reporting involves the obligation to pay advance payments. Three advance payments are required for those using the effective and flat-rate methods, due on May 30, August 30, and November 30. For the net tax rate method, one payment is due by August 30. Late payments or advance payments that may not be sufficient in relation to the VAT actually owed will incur interest. Which, In our view, makes this « simplification » ineffective, as a similar effort to submitting quarterly VAT returns will still be required.

Improvement in Combating Fraud

To combat serial bankruptcies, the partially revised VAT Act authorizes the Federal Tax Administration (FTA) to require guarantees from members of the management bodies of legal entities if they were part of a similar body in at least two other legal entities that went bankrupt within a short period.

In the field of VAT, the transfer of emission rights is vulnerable to fraud. Therefore, the transfer of emission rights, certificates, and emission reduction attestations, guarantees of electricity origin, and other similar rights will, in the future, be subject to acquisition tax, even if the acquisition takes place from a company headquartered in Switzerland.

Net Tax Rate Method

You can apply more than two net tax rates. The 10% rule remains crucial, meaning a new net tax rate must be applied if the revenue share from the specific activity exceeds 10% of the total taxable turnover.

When switching from the effective method to the net tax rate method, adjustments must be made. Previously deducted input tax on goods and services, including portions corrected for later input tax relief, must be reimbursed to the FTA according to their residual value at the time of the method change.

When switching from the net tax rate method to the effective method, adjustments are also required. You can claim input tax on goods and services according to their residual value at the time of the change.

Some net tax rates and flat rates have been reviewed and redefined by the FTA.

Special procedures related to exports (Form 1050), the posting of notional input tax (Form 1055), and margin taxation (Form 1056) have been eliminated.

Activities requiring an additional net tax rate can be requested and reported directly in the VAT return. The FTA will conduct a review and give authorization afterward.

Planning to switch to a different accounting method on January 1, 2025?

The request to change the method must be submitted before February 28, 2025. We are at your disposal to help you assess whether a method change would be beneficial for you or to assist you with the application process.