The issue of VAT liability arises when you carry out a business activity (Art. 14, para. 1 VAT Act) which generates a turnover of at least CHF 100,000 in receipts per tax year derived from taxable supplies (Art. 10 VAT Act).
Definition of a business activity
Any company, whether profit based or non-profit, and regardless of its legal form is potentially liable to VAT. Business activity (commercial or professional) commences as soon as a business is carried on independently with the aim of sustainably earning income from supplies.
A commercial or professional activity…
An activity is considered to be commercial or professional when the goods, products or services provided are destined for private consumption by a third party or to be traded on the market. This activity must generate income but not necessarily profit.
To be qualified as independent, the company must provide supplies under its own name, at its own entrepreneurial and economic risk, and independently with regards to work organisation and management. Employees are not concerned.
This notion is difficult pinpoint. The FTA namely considers that you are carrying on an independent entrepreneurial activity if you:
- Make substantial capital investments
- Possess you own business premises
- Hire your own staff
- Participate in the profit and bear losses incurred
Examples of activities liable to VAT include:
- A sports club which organises an annual celebration and charges an entry fee
- A person who regularly and systematically purchases and sells goods on an auction platform
- An artist who sells advertising in exchange for considerations
- A sports player who generates profit
- A consortium active in the construction sector
Receipts equalling at least CHF 100,000 or CHF 150,000
An owner must register for VAT when the receipts derived from taxable supplies during the financial year exceed CHF 100,000 minimum. This amount increases to CHF 150,000 for all non-profit organisations or charitable organisations (cultural or sporting associations, social enterprises, foundations, etc.).
Which goods and services should I consider to find out if I am liable to VAT in Switzerland?
All goods and services provided in return for remuneration by Swiss taxable persons are liable to VAT, provided that the taxable persons are not subject to any exceptions.
The list of VAT exempt goods and services is available at: https://www.estv.admin.ch/dam/estv/fr/dokumente/mwst/publikationen/nMWSTG/mwst-info/605-525-04.pdf.download.pdf/605-525-04_f.pdf
VAT liability: what is the timeframe?
You are liable to VAT as soon as you begin your entrepreneurial activity, take over a company or open a new branch if you think that you will reach the turnover limit of CHF 100,000 within the year following the launch.
If you cannot determine whether or not the CHF 100,000 limit will be reached at the beginning of the activity you must make an estimation within the first three months of starting the activity at the latest.
You must then register in writing with the Swiss Federal Tax Administration within 30 days.