Switzerland: Changes in the Swiss VAT landscape as of 1 January 2023

Increase of the turnover threshold for non-profit sports and cultural associations and charities

Under the current legislation, voluntarily-run non-profit sports and cultural associations and charities are exempt from VAT if they generate a world-wide turnover of less than CHF 150,000 (EUR 151,900) per year from services that are not exempt from VAT. In order to reduce the tax and administrative burden for these organisations, the Swiss Parliament decided to raise the turnover threshold for the Swiss VAT obligation to CHF 250,000 (EUR 253,200) as of 1 January 2023. 

Organisations that are no longer liable for VAT purposes can deregister at the end of the tax period. To do so, the written deregistration must be submitted to the Federal Tax Administration within 60 days of the end of the tax period, i.e. February 2023.

Outlook: Expected changes in the Swiss VAT landscape

Increase of Swiss VAT rates
The revision of the Swiss pension system requires an increase of the Swiss VAT rates. It is intended to increase the standard rate of 7.7% to 8.1%, the reduced rate (for e.g. medicine, newspapers, books, plants, etc.) from 2.5% to 2.6% and the special rate (for accommodation services) from 3.7% to 3.8%. The increased VAT rates are planned to come into force on 1 January 2024.

Mandatory electronic VAT procedures
It is planned that as of 1 January 2024 the registration and submission of Swiss VAT returns must be carried out electronically. Underlying fact is the entering into force of art. 65a of the Swiss VAT Act which stipulates that the Federal Council may prescribe the electronic execution of procedures and regulate their modalities. Registration as a taxable person and submission of the Swiss VAT returns as well as subsequent corrections of the Swiss VAT returns are to be carried out exclusively electronically via the portal provided for this purpose from the entry into force of the implementing provisions of the Swiss VAT Ordinance.

Partial revision of the VAT legislation
Another partial revision of the Swiss VAT Act is currently ongoing and is intended to take effect as of 2024. The intention is to adapt the VAT legislation to the global digital economy, relieve smaller businesses of administrative tasks and implement measures to safeguard taxes.

a) Taxation of electronic platforms
The distance seller rule ("Versandhandelsregelung") applies to businesses that achieve a turnover of at least CHF 100,000 (EUR 101,300) through the import of small consignments (tax amount of CHF 5 - EUR 5 - or less) within one tax year. This regulation proved to be only partly successful in ensuring a comprehensive taxation of imported goods into Switzerland.

In the future, the operators of electronic platforms are to be qualified as supplier of all sales facilitated by their platforms. Thereby tax collection is thought to become more efficient, since only the platforms will be registered as taxable persons instead of numerous, individual mail-order operators.

b) Fiscal representative for non-Swiss established businesses
Under the current legislation, taxpayers with a residence or place of business abroad must appoint a fiscal representative in Switzerland to fulfil their procedural obligations. The reaction to a proposed exception allowing the Federal Tax Administration to waive the requirements of such fiscal representation under certain conditions was rather reluctant in Parliament. Therefore, the current rule will likely remain in place.

Federal Tax Administration practice on non-cash contributions

The Federal Tax Administration is currently working on its renewed practice regarding the VAT treatment of non-cash contributions and it is expected that this practice will enter into force. Non-cash contributions (e.g. trademark) are to be qualified as vatable event, taxable if the place of supply is in Switzerland, unless the transfer is exempt from VAT. The issuance of participation rights shall have no VAT implications and the notification procedure will have to be applied compulsorily for non-cash contributions if the legal requirements are met. For e.g. group-internal cross-border events, the review of such contributions remains highly recommended.

Read the WTS Global VAT Newsletter here.