VAT and Foreign Companies
In principle, foreign companies that generate turnover in Switzerland are not liable to Swiss VAT.
However, as of 1st January 2015 an exception applies to foreign companies which perform a contract for work and labour on Swiss territory subject to acquisition tax. This condition was implemented to reduce competitive advantages favouring foreign companies and will undergo further modification from 1st January 2018 as part of the amendments to the VAT Act.
Foreign companies liable to VAT: the rules
All companies whose headquarters are located abroad must register for Swiss VAT if the following conditions are met:
- The company performs a contract for work and labour on Swiss territory subject to acquisition tax
- The company has an annual worldwide turnover of CHF 100,000 or higher, to be calculated from the first franc in Switzerland
By ‘contract for work and labour’ is understood the rental or any other form of work regarding an asset. Movable assets, property assets, electricity, gas and similar goods are all concerned.
Examples of contracts for work and labour:
- Sale of newspapers, medicines or drinks
- Car rental
- Watch repairs
- Verification of the workings of a machine
- Gardening and cleaning work
Foreign companies liable to Swiss VAT must also be represented by a tax representative domiciled in Switzerland. Amongst other things, this tax representative, who may be a natural or legal person, commits to submitting and paying the VAT returns to the Swiss Federal Tax Administration within the set timeframes. The tax representative must also retain all documents relating to the taxable foreign company’s tax returns.
Additionally, foreign companies liable to Swiss VAT must provide securities in the form of a bank guarantee, unlimited in time and from a Swiss bank, or cash payment.
The amendments to the VAT Act, which entered into force on 1st January 2018, notably imply certain changes in VAT liability for foreign companies. As of this date, all supply of goods or services in Switzerland is liable to VAT if the company’s worldwide turnover reaches CHF 100,000 p.a.
A further measure relating to the VAT Act amendments will impact foreign companies active in the online sales sector from 1st January 2019 onwards. This measure concerns the consignment of goods for which the value does not exceed CHF 5.00 in VAT. Market participants for whom the executed sales exceed CHF 100,000 will be liable to Swiss VAT as of 1st January 2019.
Acquisition tax: procedure
The supply of certain services by foreign companies is subject to acquisition tax. This includes services which are:
- Subject to the principle of recipient location
- Provided on Swiss territory
- Taxable on Swiss territory
- Provided by a foreign company which is not registered for Swiss VAT
Those liable to Swiss VAT must declare services and goods acquired from abroad meeting the above criteria.
Those non-liable to Swiss VAT must notify the Swiss Federal Tax Administration within 60 days following the end of the calendar year during which they have acquired goods and services if these goods and services represent an amount of over CHF 10,000 p.a. and if they constitute:
- The supply of services in Switzerland from a foreign company, not registered for Swiss VAT
- Carriers of imported data without commercial value
For deliveries exempt from import tax and exceeding CHF 10,000, the recipients – non-liable for VAT – must notify the Swiss Federal Tax Administration if the competent tax authorities have informed them of their obligations regarding acquisition tax.