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:
The net tax and flat tax rates were also changed as follows:
The maximum amounts applicable to revenue and the tax owing when using the net tax method were also changed.
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” (Beispiel für eine MWST-Abrechnung für das erste Trimester 2018 (Saldosteuersatzmethode) (only in German), Consult others forms).
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.
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 (Explanations and easy-to-understand diagram).