Changes to Switzerland’s Value Added Tax (VAT) Act will enter into force on January 1, 2018, with the aim of removing VAT-related competitive disadvantages for domestic companies.
Currently, a multinational company pays only VAT on its Swiss turnover. Foreign companies providing services in Switzerland do not have to pay VAT on Swiss turnover up to a CHF100,000 (USD103,726) threshold.
According to the Federal Council, this has led to competitive disadvantages for Swiss businesses, especially in the border regions.
Under the changes, a company’s global turnover will be taken into account when calculating its liability to the VAT. Companies with a global turnover of at least CHF100,000 will be liable to VAT from the first franc of turnover in Switzerland.
The Federal Council will delay the implementation of the revised system until January 1, 2019, for mail-order companies, on the grounds that Swiss Posts needs more time to implement the technical provisions of the new law.
From 2019, mail-order companies will be liable to VAT if their annual turnover from import-tax-free small consignments is at least CHF100,000. These companies will be required to bill customers for VAT; customers will no longer have to pay the taxes and fees levied by Customs upon importation.
The aim is again to reduce the competitive disadvantages faced by domestic companies.
The remainder of the Government’s VAT reform package – including a reduced VAT rate for electronic newspapers, magazines, and books, and margin taxation for collectors’ items – will enter into force on January 1, 2018.
The Government expects the measures to boost VAT receipts by CHF70m a year. The incorporation of global turnover into the calculation for VAT liability is alone expected to generate an additional CHF40m a year.