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Switzerland's value-added tax for electronically supplied services

With a strong economy and an educated workforce, Switzerland's industries are led by financial services and a manufacturing industry that specializes in technology.

The following content was reviewed and updated as of May 1, 2018.

Legislative effective date

Jan. 1, 2010 with revisions effective from Jan. 1, 2018.

Name of tax

Value-added tax (VAT); also referred to as:

  • Mehrwertsteuer (MwSt)
  • taxe sur la valeur ajoutée (TVA)
  • imposta sul valore aggiunto (IVA)

Statute of limitation

Five years

Standard rate of VAT

The standard rate is 7.7 percent (8 percent until Dec. 31, 2017). The reduced rate of 2.5 percent applies to some supplies, such as e-books and e-journals.

Some services, in particular education services and services provided to the members of a non-profit organization in exchange for a membership fee, are excluded from VAT.

Electronic supplies

Electronic supplies are supplies acquired (by the recipient) or provided (by the provider) directly via a remote network. The tax authorities give several examples for electronic supplies.

Electronic supplies include, but are not limited to:

  • Voice transmission (i.e., telephone, conference calls, mobile telephony) or the transmission of text (i.e., fax, telegraphy, tele-typewriter, e-mail services), images, sounds or other, provided that the main element is the transmission
  • Transmission services provided to the organizer of radio and television programs
  • Access to the internet or other information networks (i.e., analogue modem, ISDN, ADSL, VDSL, WLAN or PWLAN)
  • The provision of websites, the hosting of websites, the remote maintenance of programs and equipment; the electronic provision of software and their updating via the internet
  • The provision by electronic means of images, texts and information (e.g. stock prices, weather forecasts or public transport timetables) and databases
  • The electronic provision of music, films and games, including games of chance and lotteries; the provision of memory capacity on the internet (i.e., hosting of websites or servers, etc.)
  • Downloading music, movies and podcasts; download of programs, games (including games of chance and lotteries) and other applications; downloading graphics, texts, information, etc.

Electronic supplies do not include:

  • The communication between the persons providing and receiving the service by wire, wireless, optical or other electro-magnetic media
  • Educational services in interactive form
  • The lending for use of specifically designated equipment or equipment parts for the sole use of the lessee for the transmittal of data

Registration

Any person who carries on a business based abroad is liable to register for Swiss VAT if it makes taxable supplies in Switzerland and the value of those supplies (including non-Swiss revenue) exceeds CHF 100’000. Taxable supplies include electronic supplies to Swiss customers who are not registered for Swiss VAT.

Customer identification

Swiss legislation effectively differentiates customers based on their VAT registration status. Customers that are VAT registered will self-assess VAT under the reverse charge mechanism and will not require the non-resident supplier to charge VAT. Customers that are not registered for VAT cannot reverse charge electronic services received from abroad and so the supplier will need to register in Switzerland (subject to the registration threshold). After the registration, the supplier shall charge VAT to both registered and non-registered customers.

Customer location

The place of supply of a service to a business customer is deemed to be the place at which the recipient of the service has its registered office or a permanent establishment for which the service is provided, or, in the absence of such a registered office or such a permanent establishment, its domicile or the place of his normal abode. This general principle is completed by more specific rules.

If a natural person domiciled abroad uses a holiday home or holiday apartment solely for a private holiday and has no place of residence or weekly place of residence in Switzerland, the place of supply is located abroad.

Place of residence may be determined as follows.

  • For electronic services that are not provided via mobile networks, the customer address (billing country) is used.
  • For electronic services provided via mobile networks the country identification code of the SIM card is used, which should correspond with the customer's billing country. 

In the case of electronic services provided by third parties acting as intermediaries, the various reports provided to the supplier containing transaction detail are acceptable supporting documents for use in determining the place of supply of the service. In case of errors in the report, the responsibility for the correct VAT payment depends on the kind of representation contract between the parties. The intermediary is responsible in the case of indirect representation, where the intermediary acts in his own name. The original supplier is responsible in the case of direct representation, where the intermediary acts in the name of the original supplier.

Supplier identification

Commercial suppliers of electronic services, without a seat or domicile in Switzerland who are liable for Swiss VAT are required to register in Switzerland for VAT. The legal form of the commercial supplier is irrelevant. The supplier shall be identified by contractual agreement with the recipient.

The definition of a commercial supplier does not include not for profit organizations as defined by Swiss law. This does not mean that an organization that identifies itself as not for profit in its home country automatically qualifies under the Swiss definition.

In the case of electronic services provided by intermediaries, services and deliveries that the intermediary charges in the name and on behalf of an original supplier are considered as provided by the original supplier (direct representation). In order to be represented, the original supplier must expressly report the representation to the recipient of the service. If this is not the case, the services are deemed to be provided by the intermediary (indirect representation).

Procedural matters

Liability begins with the first supply of services in Switzerland, and voluntary registration in the register of taxable persons may be applied for at that time (no sooner) and only during the same tax period. If a foreign business is liable to remit and collect Swiss VAT, it has to appoint a VAT representative in Switzerland and register for Swiss VAT.

While applying for registration, the foreign company is required to provide information such as: the legal type of the company, information on any permanent establishment in Switzerland, contact data of the company and of their Swiss VAT representative, type of activity, date of beginning of activity in Switzerland, date of closing of financial year, estimated annual taxable turnover in Switzerland, type of VAT reporting, etc.

Once the registration application is submitted, the tax authorities request a security payment corresponding up to 6.5 percent of the annual turnover, depending on the type of company. The VAT registration is finalized once the security payment is made. The VAT representative will receive all communication from the tax authorities.  

Historic transactions

Switzerland has a voluntary disclosure program which might assist in mitigating the risk of penalties, particularly for late notification of registration liabilities.

 

 

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table of contents

Introduction to the digital services VAT guide

A detailed guide to compliance with countries seeking to tax digital services supplied by nonresident suppliers.

Applying VAT to electronically supplied services

Key points to consider when determining how electronically supplied services should be accounted for with regard to VAT rules globally.

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