Swiss VAT rate reduced as of 1 January 2018

in Tax, 25.09.2017

Swiss voters said no to the reform of the pension scheme. As a result, Swiss VAT rates will be reduced. Taxable persons must be ready as of 1 January 2018 – a very short deadline.

In a vote connected to the reform of the pension scheme law, the Swiss rejected a 0.3% VAT surcharge for pension funds. As the existing surcharge expires on 31 December 2017, VAT rates will be reduced to 7.7% (normal rate) and 3.7% (special rate for accomodation) as of 1 Jauary 2018. The reduced rate of 2.5% will remain unchanged.

Taxable persons will have to adapt their systems (e.g. VAT codes, invoice templates), pricing, and various agreements which are influenced by VAT rates, including online and paper marketing material or offerings. Companies that were not already prepared now have a very short deadline to get things reaady. For example, if a new car is to be delivered in January 2018, the sales agreement, on account invoice and leasing rate must already be based on the new rate of 7.7%.

Application of the new tax rates

Although, at the time of writing, the Federal Tax Administration (FTA) has not yet published the transitional provisions, the principle of tax rate application is clear. According to Art. 115 para. 1 of the Swiss VAT Act (VATA), the time when the goods are delivered (or imported) or the service is supplied is decisive, not the invoicing date. For supplies which are partially provided in 2017, the higher VAT rate must be applied on this part of the supply. If an invoice shows wrongly the higher VAT rate, VAT must be declared and paid at this rate. The recipient is allowed to deduct input tax on the higher rate, but may refuse to pay an invoice with wrong rates.

Net or flat tax rates may also change. The FTA will calculate flat and net tax rates and decide which of them have to be changed. According to Art. 115 VATA, taxable persons who get a new net or flat tax rate are allowed to choose the effective calculation method without waiting for expiration of the blocking period – a good opportunity to reconsider the tax calculation method.

New VAT return form

For taxpayers who do not use the electronic VAT declaration, the FTA will use a new declaration form which shows the new and the old tax rates. Users will have to adapt their printed templates accordingly.

In short

  • Prepare ERP (new codes, invoice templates, etc.)
  • Review sales and purchase agreements
  • Review and recalculate pricing
  • Reconsider calculation method (if flat/net tax rate changes)

 

 

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