Section 1: The Basics of VAT in Switzerland

• Switzerland uses a net value-added tax system where VAT-registered businesses collect tax from customers and deduct VAT paid on business purchases before remitting the difference to the government
• The Federal Act on Value Added Tax (VAT Act) governs the VAT system in Switzerland
• VAT was first introduced in Switzerland in 1995 and has since become one of the Confederation's most important revenue sources

Section 2: Current VAT Rates (as of 2023)

• Standard rate of 7.7% for most goods and services
• Special rate of 3.7% for hotel accommodation
• Reduced rate of 2.5% for essential goods like food, medicine, books and some agricultural supplies
• 0% rate is considered a tax exemption; allows VAT recovery on exports
• If you're VAT-registered, you can claim back "notional" 2.5% VAT on purchases from non-VAT registered farmers, foresters, cattle dealers

Section 3: Who Needs to Register for VAT?

• Businesses with annual turnover exceeding CHF 100,000 must register for VAT
• For new businesses, the threshold is prorated (e.g. CHF 8,333/month if started mid-year)
• Sports/cultural businesses with >CHF 150K non-exempt revenue must register
• Voluntary registration is allowed even if under threshold

Section 4: Pros and Cons of VAT Registration for Freelancers

Advantages:

• Contributes to solidarity tax
• Distinguishes you as a business vs individual
• Allows deducting VAT on all business purchases

Disadvantages:

• More complex accounting and admin
• Quarterly filing requirements

Section 5: How to File a VAT Return

• VAT returns due quarterly (or semi-annually for simplified method)
• Two calculation methods: Effective and Flat Tax Rate
• Returns detail sales, purchases, and VAT collected/paid
• 60 day filing window after period end
• Can still file manually or electronically until 2025
• Payment made directly on FTA website after filing

Section 6: VAT Exemptions and Deductions

• Exports and some international services are VAT exempt
• Report export sales without VAT in box 221
• Deduct discounts, rebates from total revenue in box 235
• Distinguish between capital and operating expenditure for input tax
• Consider own consumption and mixed use adjustments

Section 7: Audits and Penalties

• FTA conducts audits to ensure VAT compliance
• Late filing penalties include interest and fines
• Retrospective payment corrections possible
• Criminal penalties up to CHF 800K for false returns, CHF 20K for negligence

Section 8: Practical Examples

Example 1

Web designer/marketing consultant charging standard 7.7% VAT

• Invoices client 725 CHF + 55.75 VAT = 775.75 incl 2% early pay discount
• Client pays 760.25; 15.50 discount of which 1.11 is VAT to be deducted
• Credit card fee is non-VAT deductible business expense

Example 2

Trainer invoices 1000 for VAT-exempt 2-day seminar plus travel

• Seminar billed without VAT
• Hotel charges 300 + 11.10 VAT (3.7%) + 2.00 city tax = 313.10
• 11.10 hotel VAT is deductible input tax

Section 9: New VAT Rates from January 1, 2024

• Standard rate: 8.1%
• Reduced rate: 2.6%
• Special lodging rate: 3.8%
• Part of retirement reform financing
• For invoices spanning rate change:
  • Issue separate invoices for 2023 vs 2024 portions, or
  • Combine on one invoice but clearly distinguish applicable rates