Swiss VAT Management Made Simple

Effective Method: How It Works in Detail

You calculate VAT on all sales (output tax), subtract VAT paid on business purchases (input tax), and remit the difference.

VAT Due = VAT Collected on Sales - VAT Paid on Purchases

Who must use it: Businesses with annual turnover exceeding CHF 5,005,000 (mandatory), or any business that prefers maximum accuracy and full input tax recovery.

Filing frequency: Quarterly (standard), monthly (if you consistently receive refunds), or annually from 2025 (requires advance payments).

Example: A graphic designer invoices CHF 150,000 (excluding VAT). With 8.1% VAT, they collect CHF 12,150 in output tax. They paid CHF 3,500 in input tax on business expenses. VAT due: CHF 12,150 - CHF 3,500 = CHF 8,650.

Net Tax Rate Method: How It Works in Detail

Instead of tracking every purchase receipt, you apply an industry-specific rate that accounts for typical input tax deductions.

VAT Due = Total Turnover (incl. VAT) x Net Tax Rate

Eligibility: Annual turnover under CHF 5,005,000 (including VAT), annual VAT liability under CHF 103,000. Generally requires using the Effective Method for 3 years first (exceptions exist).

Filing frequency: Semi-annually with simplified declarations.

Common freelancer net tax rates:

Example: The same graphic designer with CHF 150,000 revenue applies the 6.1% net tax rate. Total turnover including VAT: CHF 162,150. VAT due: CHF 162,150 x 6.1% = CHF 9,891. In this scenario, the Effective Method saves CHF 1,241 annually but requires more detailed bookkeeping.

Choosing the Right Method

Choose the Effective Method if:

• You have significant business expenses (over 40% of revenue)
• You are making substantial equipment or software investments
• You serve primarily B2B clients
• You already have strong bookkeeping systems in place

Choose the Net Tax Rate Method if:

• You have minimal business expenses (under 25% of revenue)
• You value administrative simplicity (semi-annual filing)
• You maintain healthy profit margins
• You are a solo freelancer without an accounting department

Invoice Basis vs Payment Basis

Within either primary method, you choose when to recognize VAT:

Invoice Basis (Agreed Consideration): Account for VAT when invoices are issued or received, regardless of payment timing. Standard approach most accountants expect, but you may pay VAT before receiving payment from slow-paying clients.

Payment Basis (Consideration Received): Account for VAT only when payments are actually sent or received. Better cash flow management -- you only pay VAT on money you have actually collected. Available only for businesses under CHF 5 million turnover, and requires FTA authorization. Best for freelancers with extended payment terms or clients who often pay late.

Voluntary Registration Below CHF 100,000

If your annual turnover stays under CHF 100,000, registration is optional. Voluntary registration can make financial sense when you can recover VAT on startup investments (equipment, software, marketing). For example, CHF 30,000 in first-year expenses means CHF 2,430 in recoverable VAT at 8.1%.

Key considerations:

• Minimum 3-year commitment once registered
• Quarterly administrative burden for filing returns
• B2C pricing may become less competitive with 8.1% added
• Rule of thumb: If you recover more than CHF 2,000-3,000 annually in input tax and primarily serve B2B clients, voluntary registration typically pays off