VAT Flat Rate Method with Two Flat Tax Rates

As a Swiss freelancer who is VAT-registered and uses the flat rate method, you know the principle: you charge your clients VAT at the statutory rate and then only remit the lower flat tax rate to the FTA. You get to keep the difference. Simple -- as long as you only have one flat tax rate.

But what happens when the FTA has approved two different flat tax rates for you? This occurs more often than you might think: for example, when you sell both services and products that are subject to different tax rates. In this case, the accounting becomes a bit more complex.

In this guide, we'll show you step by step how to set up Magic Heidi so that you can keep track of everything even with two flat tax rates and prepare your VAT return cleanly.

The Challenge: Two Flat Tax Rates

Some freelancers receive two different flat tax rates from the FTA. When filing your return, you can't simply add up all your income and apply a single rate -- you need to split your income by flat tax rate and calculate each one separately.

• Services & Products: You offer consulting (e.g. 6.4%) and also sell physical products (e.g. 2.3%).
• Different Business Areas: Your business activities span areas that are treated differently for tax purposes.
• Simplified Accounting Method: Magic Heidi uses simplified accounting -- with a clever workaround, you can map two rates as well.

Quick Refresher: How the Flat Rate Method Works with One Rate

Before we dive into the two-rate topic, here's a quick reminder of how the standard procedure works:

1. You create an invoice, e.g. for CHF 100.00 net.
2. You add the statutory VAT of 8.1%, resulting in an invoice amount of CHF 108.10.
3. The client pays the CHF 108.10.
4. For the VAT return, you take your total income (gross, i.e. including VAT) and multiply it by your net flat tax rate -- for example 6.1% or 5.3%.
5. The result is the amount you owe the FTA.

In Magic Heidi, this can be handled directly via the integrated VAT function when you have a single flat tax rate. Simple and fast.

4 Steps to a Correct VAT Return with Two Rates

With this workaround, you can cleanly map two flat tax rates in Magic Heidi.

Step 1: Set Up Payment Methods

Use the payment methods in Magic Heidi as a distinguishing feature for your two flat tax rates.

• Open Settings -> Categories -> Payment Methods
• Create e.g. "Bank Transfer -- Flat Tax Rate 6.4%"
• Create e.g. "Bank Transfer -- Flat Tax Rate 2.3%"
• Choose descriptive names that clearly identify the rate

The trick is to use the payment methods in Magic Heidi as a distinguishing feature for your two flat tax rates. If you use multiple payment channels, you can create a separate payment method for each channel and each tax rate.

Step 2: Assign Payments

For every payment you record, select the correct payment method.

• Service -> Select payment method with higher rate
• Product -> Select payment method with lower rate
• You can adjust existing invoices retroactively by removing the payment and re-entering it with the correct payment method

Step 3: Export Data

Export your income via the Analytics function as an Excel file.

• Navigate to the Analytics section
• Select the desired period (quarter/half-year/year)
• Export data as an Excel file (.xlsx)
• Income is broken down by payment methods

Step 4: Calculate VAT Manually

Calculate the VAT owed per flat tax rate in a spreadsheet.

• Filter and sum income by payment method
• Gross amounts x flat tax rate = VAT owed
• Add both amounts = total VAT
• Create a template for recurring returns

Calculation Example

How to Calculate the VAT Owed

1. Income for the first flat tax rate: Filter all rows with "Flat Tax Rate 6.4%" -> CHF 50,000.00 x 0.064 = CHF 3,200.00
2. Income for the second flat tax rate: Filter all rows with "Flat Tax Rate 2.3%" -> CHF 20,000.00 x 0.023 = CHF 460.00
3. Total: CHF 3,200.00 + CHF 460.00 = CHF 3,660.00

Tip: Create a small template in Google Sheets or Excel that you can reuse every quarter or half-year. This saves you time with every return.

Avoid Common Mistakes

To ensure your VAT return with two flat tax rates goes smoothly, keep the following points in mind:

• Consistent Assignment: Assign every single payment to the correct payment method.
• Use Gross Amounts: Always calculate with amounts including VAT, not with net amounts.
• Regular Checks: Check monthly whether all payments are correctly categorized.
• Verify Flat Tax Rates: The FTA occasionally adjusts the rates -- check the current rates annually.

Summary

Even though Magic Heidi is primarily designed for simple cash-based accounting, you can use a clever workaround to cleanly handle the flat rate method with two different flat tax rates:

1. Set up payment methods -- one per flat tax rate.
2. Consistently assign payments -- select the correct payment method for each invoice.
3. Export data -- via the Analytics function as an Excel file.
4. Calculate VAT manually -- sum the income per flat tax rate and apply the respective rate.

The additional effort is manageable and can be further reduced with a simple spreadsheet template.