What is VAT and why do you need to register?

Value Added Tax, or VAT, is a consumption tax assessed on goods and services in Switzerland and throughout the European Union. If your freelance business is based in Luzern and you earn over a certain threshold, you are required by law to register for VAT and charge it to your clients.

Registering for VAT can seem daunting at first, but it comes with benefits. You'll be able to claim back any VAT you pay on business expenses. It also makes you look more professional and established to clients. Some larger companies will only work with VAT-registered freelancers.

VAT rates and thresholds in Switzerland

The standard VAT rate in Switzerland is currently 7.7%. Some goods and services, like hotel lodging, are taxed at a lower rate of 3.7%. And basic necessities, like most groceries, are taxed at an even lower rate of 2.5%.

As a freelancer in Luzern, you must register for VAT once your annual turnover exceeds 100,000 CHF. Below this threshold, VAT registration is optional (but still potentially advantageous).

The VAT registration process in Luzern

Ready to get your freelance business in Luzern VAT registered? Follow these steps and you'll be VAT official in no time!

1. Determine if you need to register

First, calculate your freelance income over the last 12 months. If it exceeds 100,000 CHF, you must register for VAT. If you're below the threshold but want to register voluntarily for the benefits, you can do that too.

Consider factors like:

• Current annual turnover
• Projected income for the year ahead
• Whether your clients require you to have a VAT number
• Plans to purchase equipment or property for your business

2. Gather required documents and information

To register for VAT, you'll need to provide:

• Personal details (name, home address, date of birth, etc.)
• Business details (legal business name, address, business activities)
• Bank account information
• Estimated annual turnover
• UID number (company identification number) if you have one
• Copies of invoices or contracts if available

Staying organized from the start will make your freelance life in Luzern much easier!
Consider using accounting software or hiring an accountant to keep everything in order.

3. Choose your VAT filing frequency

In Switzerland, you can choose to file VAT returns either quarterly or semi-annually (every six months). If your estimated annual VAT liability is over 1,000,000 CHF, you must file quarterly.

Here are some things to weigh when choosing:

• Quarterly is better for consistent cash flow management
• Semi-annual involves less paperwork and admin

Your accountant may have a recommendation based on your business

4. Complete and submit the application

You can register for VAT in Luzern either online via the ESTV SuisseTax portal or by mail/fax using form Nr. 1388.
The online system is quick, easy, and recommended. Registering by paper takes a bit longer.

Information you'll need to provide:

• Type of business entity (sole proprietorship, GmbH, etc.)
• Start date for VAT liability
• Estimated taxable turnover
• Filing frequency (quarterly or semi-annual)
• Reason for registration (required vs voluntary)
• Your signature

5. Wait for your VAT number

Once you've submitted your VAT registration application in Luzern, the waiting game begins. Expect it to take around 2-4 weeks to get your official VAT number via mail.

In the meantime:

• Set up your accounting system to track VAT
• Update your invoice template to include VAT
• Inform regular clients you'll be adding VAT to future invoices
• Start tracking business expenses you can claim VAT back on

Once your VAT number arrives, you're in business!
Start adding VAT to your invoices and enjoying the benefits of being a VAT-registered freelancer in lovely Luzern.

Tips for freelancers navigating VAT in Luzern

Congrats, you're now a VAT-registered freelancer in Luzern!
Here are some tips to keep you on the right track:

• Keep detailed records
• Maintain records of all business income and expenses, including receipts and invoices.
  You'll need these for your VAT returns and in case of an audit.

Know what you can claim

In general, you can claim back VAT on goods and services used wholly and exclusively for your business.
This could include:

• Office rent and utilities
• Computer equipment and software
• Business travel and dining
• Subcontractor services

Charge VAT correctly

Double check that you're applying the right VAT rate every time you invoice a client. Most freelance services use the standard 7.7% rate in Switzerland.

File on time

Don't miss the deadline for your VAT returns and payments!

Late submissions can result in penalties and interest. Set calendar reminders or work with an accountant to stay punctual.
To ensure you don't miss the deadline for your VAT returns and payments, it's crucial to establish a robust system for tracking deadlines and submissions. Here are some additional tips:

1. Calendar Reminders: Set up recurring reminders in your calendar system well in advance of the VAT filing deadlines. Include both the due date for submitting the return and the payment deadline.

2. Automated Alerts: Many accounting software solutions offer automated alerts and reminders for VAT deadlines. Utilize these features to receive notifications in advance of the submission date.

3. Accountant Support: If possible, work with an accountant who can manage your VAT obligations. They can help ensure timely submissions and payments, as well as provide guidance on VAT-related matters.

4. Regular Reviews: Schedule regular reviews of your financial records to ensure accuracy and completeness. This can help identify any issues or discrepancies well before the deadline.

5. Preparation in Advance: Aim to complete your VAT returns well ahead of the deadline. Procrastination increases the risk of errors or missing the submission date.

6. Penalty Awareness: Familiarize yourself with the potential penalties for late submissions or payments. Understanding the consequences can motivate you to prioritize timely compliance.

7. Training and Education: Stay informed about VAT regulations and requirements to avoid misunderstandings or oversights. Attend workshops, seminars, or online training sessions to enhance your knowledge.

8. Contingency Plans: Have contingency plans in place in case unexpected circumstances arise, such as technical issues with filing systems or disruptions to your normal business operations.

By implementing these strategies, you can reduce the risk of missing VAT deadlines and mitigate the associated penalties and interest.

Adjust for changes

If your circumstances change (ex. Moving out of Luzern, closing your business), inform the tax authorities right away.
You may need to cancel your VAT number or at minimum update your details.

Making the most of Luzern as a freelancer

Luzern is a fantastic city for freelancers, with a supportive business community, great networking opportunities, and an unbeatable quality of life. Take advantage of all Luzern has to offer!

Join local organizations
Groups like Luzerner Unternehmerverband (Luzern Entrepreneurs Association) and Digital Luzern host workshops, seminars, and casual meet-ups to help you build skills and connections.

Attend conferences and events
Keep an eye out for conferences or trade shows relevant to your freelance niche happening in Luzern or nearby. They're great places to find new clients and stay on top of industry trends.

Explore co-working spaces
Luzern has a growing number of co-working spaces where freelancers can rent a desk, network with other independents, and enjoy a more social work environment.