There are some significant changes as a result of the VAT reform, which will come into force on 1 January 2025. Companies with an annual turnover of up to CHF 5 million will now be able to file VAT returns annually, the net tax rate method (Saldosteuersatzmethode) will be simplified, but there will also be a financial disadvantage. By 28 February 2025, a number of points need to be set properly.

The Federal Council brought the partial revision of the Value Added Tax Law (MWSTG) adopted by Parliament in June 2023 into force on 1 January 2025. The partially revised Value Added Tax Ordinance (MWSTV) will also come into force at the same time. One exception is the compulsory website usage for the balance and lump-sum tax rate method, group taxation and deregistration as a taxable person, which will not be introduced until 1 January 2027.

In this article, we will limit ourselves to what we consider to be the key changes:

Annual VAT declaration
Until now, companies that effectively filed their VAT returns could choose whether to file quarterly or monthly. Companies with a turnover of up to CHF 5 million can now apply to file their VAT returns annually. The application must be submitted by February 28 for taxable companies. However, installment payments must be made anyway. The Federal Tax Administration may only approve annual reporting for companies that have submitted their VAT returns on time in the last three years and have made their payments on time.

We are rather skeptical as to whether this measure makes sense and leads to cost savings. In principle, quarterly billing has led to the accounts being updated and checked on a quarterly basis. Incorrect trends in the course of business were identified at an early stage and measures could be introduced. This significantly reduced the effort required to prepare the annual financial statements in the spring of the following year. Many accountants would no longer be able to cope with the workload if the entire year had to be reconciled and settled for the majority of clients in the first two months of the year. We recommend switching to annual accounting only for companies that are not operationally active. 

Net tax rate method (Saldosteuersatzmethode)
Companies with a turnover of up to around CHF 5 million can continue to use the net tax rate method. This means that although they add 8.1% VAT to their invoices, they only have to pay part of this to the tax authorities at a net tax rate. The amount of the net tax rates depends on the expected gross profits of the various sectors and the input tax calculated by the tax authorities. There are 10 different net tax rates between 0.1% and 6.8%. For a consulting company, for example, this is 6.2%. Previously, companies could apply a maximum of two different net tax rates. If a company had various business activities, it had to apply the higher net tax rate for smaller activities. Now, all net tax rates can be applied if the proportion of turnover is 10% or more per activity.

If a company effectively invoiced until 2024 and now wants to use the net tax rates from 1 January 2025, it must report this by 28 February 2025. So far, the transition has been tax-neutral. From 1 January 2025, own consumption must be accounted for in this transition. This means that the input tax claimed over the last 5 years or, in the case of unmovable asets, over the last 20 years, as well as on inventories etc., must be repaid to the Federal Tax Administration on a pro rata basis. On the other hand, if someone switches from the net tax rate method to the effective method, a tax deduction for imputed tax can be made.

Previously, a separate form could be used to have the tax deducted using the export net tax rate method. This option will no longer be available from 1. January 2025.

Companies will have to deal with the changed conditions and consider carefully whether a transition to the net tax rate method is still of interest or whether they should switch back to the effective method.

Further changes to the tax law
Parliament had called for the following reforms in various motions:

• Online mail order platforms should be regarded as service providers and therefore be subject to VAT. Mail order platforms should now declare and pay tax on all deliveries of goods that are processed via their platform.
• Foreign tour operators are to be exempt from tax liability if they organize trips to Switzerland.
• Monthly hygiene products are to be taxed at the reduced rate.
• Subsidies paid by public authorities should not be subject to VAT if they are paid to fulfill basic statutory tasks. Unfortunately, the legislator has not taken the opportunity to waive the input tax reduction for subsidies in general.
• New tax exemptions are to be introduced for active participation in cultural events and for coordinated care services in connection with medical treatment.
• In order to prevent abuse, the obligation to pay input tax will now apply to the transfer of emission rights, certificates and attestations for emission reductions, guarantees of origin for electricity and similar rights.
• Furthermore, an information obligation will be introduced for all online platforms. In future, the ESTV can request them to inform them who is offering services via the platform to an extent that could trigger VAT liability. This mainly concerns services in the area of transportation (cab rides, courier rides) and accommodation (rental of accommodation), for which the platforms are not considered to be service providers.
• The following are now excluded from VAT:
  
  • travel services resold by domestic and foreign travel agencies and their associated services (foreign travel agencies are therefore not taxable in Switzerland if they organize trips to Switzerland);
  • active participation in cultural events;
  • the provision of coordinated care for medical treatment;
  • the provision of infrastructure to attending physicians in outpatient clinics and day clinics;
  • the care and housekeeping services of private Spitex;
  • the provision of personnel by all non-profit organizations;
  • the offering of investment groups of investment foundations in accordance with the Federal Law on Occupational Retirement, Survivors' and Disability Pension Plans (BVG) and the management of investment groups.
• As a measure against mass bankruptcies, the partially revised VAT Act authorizes the ESTV to demand securities from members of the managing bodies of legal entities if they are members of the managing body of at least two other legal entities that have gone bankrupt within a short period of time.

This reform was approved by the Swiss parliament under the title “simplification” of VAT. However, there are various complicated new regulations in the details, which could pose a challenge for some companies. If you have any questions, we will be happy to assist you.

+41 41 226 30 56
This email address is being protected from spambots. You need JavaScript enabled to view it.