Insights

A VAT Health Check ensures that a company’s value-added tax obligations are correctly fulfilled and associated compliance risks are minimized. The analysis identifies potential weaknesses in VAT processes and classifications, offering opportunities to optimize and reduce risks while achieving more efficient tax management.

On 1 January 2025, the partially revised value added tax (VAT) law will come into force. The administrative practice associated with the changes to the law and ordinances is still largely undefined, which is why many details regarding practical implementation are still open and require individual clarification. The changes to VAT affect both national and international companies operating in Switzerland and Liechtenstein. The changes are significant as they not only have an impact on tax liability, but may also entail administrative requirements and financial consequences.

The Federal Supreme Court has clarified in two recent rulings that financial transfers within the same municipality are not to be classified as subsidies. Based on these rulings, municipalities should review how such financial transfers are treated for VAT purposes and assess the potential impact of this new VAT classification on their autonomous departments.

As you know, new VAT rates have been in force since January 1, 2024. These are: standard VAT rate 8.1 % (previously 7.7 %), reduced rate 2.6 % (previously 2.5 %) and special rate for accommodation services 3.8 % (previously 3.7 %) as well as various changes under the net tax rate and lump-sum tax rate regime. In many cases, a VAT rate change is unproblematic and is implemented to the extent that the VAT rates on the invoices are adjusted. However, there are also constellations that are not quite so easy to handle and have different accounting and contractual effects depending on the specific case.

Registration for VAT and submission of the VAT returns via the e-portal of the Federal Tax Administration will become mandatory from 1 January 2024. In addition, a one-year transition period will be granted.

If a profit is made through the sale of a property in Liechtenstein, the seller must pay property gains tax (Grundstücksgewinnsteuer). The tax is levied on the difference between the initial investment costs and the proceeds of the sale. The investment costs include not only the purchase price but also, for example, value-enhancing expenses. It is not always clear whether a measure is value-enhancing or merely value-maintaining. Christian Reichert and Michael Heeb have summarised the topic in an article in the Wirtschaftregional of 10 February 2023, explaining how the real estate gain is calculated, which special cases exist and why you should already keep the tax in mind when acquiring a property.

Based on a people’s decision of 25 September 2022 the Swiss VAT rates are going to be increased. The increase of the VAT rates is planned to become effective as from 1 January 2024.

The right to deduct import tax is subject to certain legal requirements. In addition, the company must be able to document a claimed import tax deduction. However, despite the principle of free assessment of evidence, not every document related to an import is suitable for proving the claim to an import tax deduction in a legally adequate manner.

If the employer provides its employee with a business vehicle, which the employee may also use privately, this is deemed to be a supply that is provided by the employer. This supply is subject to the standard VAT rate and must be declared accordingly in the VAT return of the employer.

VAT is first and foremost a tax and contributes to the financing of government tasks. On closer inspection, however, certain procedures and precautions in the field of VAT have a positive effect on the available liquidity by reducing unnecessary liquidity commitment from a business management point of view. The notification procedure for import tax is used to illustrate the effect of certain VAT arrangements.

Cross-border e-commerce: Tax-efficient and customer-friendly delivery process to Switzerland A VAT guide to cross-border e-commerce for foreign web shops

From the 2019 tax year onwards, Liechtenstein holding companies will be subject to tax offsets in the area of equity interest deduction if the subsidiary is not fully financed with equity, i.e. the equity of the holding is less than the carrying amount of shareholdings.

The Swiss market is attractive for foreign e-commerce retailers, as it attracts high turnover. Products typically offered online to consumers (B2C) are textiles, shoes, cosmetics and beauty, food and household appliances, home electronics, furniture, books and much more. Online trading also plays a certain role in B2B transactions. The products traded depend on the respective industry.

With less than two months to go before 31 October, it seems ever likely that, should the UK leave the EU, it will be without a deal with the European Union. It is still possible that a deal may be agreed or that BREXIT day may be postponed further but both Government and business should be prepared for an imminent ‘no-deal’ departure. This Briefing Paper provides insight into the latest VAT and Customs developments for both importers and exporters in a ‘no-deal’ scenario.

As of 1 January 2018 a non-established business making electronic and telecommunication services to a recipient in Switzerland must register for VAT in Switzerland, if the Swiss recipient itself is not registered for VAT, unless the non-established business can prove that its worldwide revenue from all its supplies and services is less than CHF 100,000 per year. Up to 31 December 2017 such a non-established business has only to register for VAT, if its electronic and telecommunication services to Swiss recipients not registered for VAT amounts to CHF 100,000 or more per year.

We are seeing many changes relating to registration requirements, digital reporting requirements, the approach to audits and compliance by tax authorities and the approaches to taxing the digital economy. It has been said that we are now living in a volatile, uncertain, complex and ambiguous (VUCA) world, and in relation to international indirect taxes, this is certainly the case.