VAT reduction from January 1, 2018: impact for SMEs

VAT rates are dropping from January 1, 2018. The new rates are detailed below. 

On January 1, 2018, the standard VAT rate dropped from 8% to 7.7%. This is the first time that rates have been reduced since the introduction of the tax. This new rate is due to the removal at the end of 2017 of the additional levy used to fund disability insurance through VAT (0.4 percentage points). At the same time, VAT has increased by 0.1 percentage point for the financing and development of the railway infrastructure.

The changes to taxation rates are as follows:

 

Until 31 Dec 2017

From 1 Jan 2018

Standard rate

8.0%

7.7%

Reduced rate

2.5%

2.5%

Special rate for accommodation

3.8%

3.7%

The net tax and flat tax rates were also changed as follows:

Old rates (until 31 Dec 2017)

New rates (from 1 Jan 2018)

0.1%

0.1%

0.6%

0.6%

1.3%

1.2%

2.1%

2.0%

2.9%

2.8%

3.7%

3.5%

4.4%

4.3%

5.2%

5.1%

6.1%

5.9%

6.7%

6.5%

The maximum amounts applicable to revenue and the tax owing when using the net tax method were also changed.

 

Maximum amounts (until 31 Dec 2017)

Maximum amounts (from 1 Jan 2018)

Maximum revenue when using the net tax method

CHF 5,020,000

CHF 5,005,000

Maximum tax owing when using the net tax method

CHF 109,000

CHF 103,000

The new VAT rates (valid as of January 1, 2018) are given on all VAT forms used for reporting purposes, on the left-hand side, in section “II. Tax Calculation”.

Overview of the most important changes for companies

The partial revision of the VAT law does not involve any fundamental changes for most companies located in Switzerland. However, by removing some of the competitive obstacles associated with VAT, the situation of Swiss companies should improve indirectly:

  • Global revenue is now used to determine tax rates. As of January 1, 2018, all companies, whether located in Switzerland or providing services in Switzerland and generating annual revenue of at least CHF 100,000 in Switzerland and abroad from services excluded from the scope of the tax, will be liable for VAT.
  • From January 1, 2019, any person sending at least CHF 100,000 per annum from a foreign country to Switzerland by means of smaller dispatches exempt from the tax levied on imports (i.e. when the import does not exceed CHF 5) shall henceforth be subject to tax in Switzerland. 

General information

It is neither the date of raising the invoice nor its payment that determines the tax rate to be applied, but the date or period of performance of the service. If the service was supplied before and partly after the tax reduction date, the former system shall apply in principle to services supplied up to December 31, 2017, whereas the service supplied from January 1, 2018 onwards shall be subject to the new rates.

Special situations

  1. Advance payments and billing for advance payments
    An advance payment is considered to have occurred when the service has not yet been delivered at the time of creating the tax claim. If, at the time of advance payment or invoicing for advance payment, it is anticipated that the delivery or supply of services will be fully or partially performed after December 31, 2017, the portion of the service to be supplied after that date may already be subject to the new rate on invoices sent to the customer and on the VAT return.
  2. Periodic services supplied in part after January 1, 2018
    Season tickets for travel services (e.g. half-rate and standard season tickets/ski passes) or contracts for the servicing and maintenance of elevators, household appliances, IT systems, etc. must be paid for in advance. If this kind of season ticket or contract extends beyond the date the tax reduction enters into force, a prorated system shall apply in principle to the service, broken down between the service provided before and after the new rate.
  3. Reductions of the service provided/Annual discounts/Returns and cancellations of services
    Reductions of the service provided (discounts, rebates, claims, losses) over the period before January 1, 2018, must be adjusted using the old rates. This situation also applies to annual discounts (discounts and other rebates applicable to the 2017 turnover). They must be considered as reductions of the service delivered at the rates applicable on the date or during the period when the service was delivered.

Information

Last modification 27.09.2019

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