Switzerland VAT reform will be effective 1st January 2018

The partial revision of Switzerland’s Value Added Tax Act will come into force on 1 January 2018, the Federal Council determined 2 June.

Under the new regime, to become VAT liable, global turnover should be taken into account instead of just Swiss turnover. Therefore, companies whose global turnover is at least 100,000 CHF will be liable to VAT from the first franc of turnover in Switzerland.

The aim of this provision (article 10) is to eliminate the VAT-related competitive disadvantages for domestic companies and activities, especially in the border regions.

Other minor changes in the new legislation, like reduced VAT rate for electronic newspapers, magazines, and books; margin taxation for collectors’ items; and others will enter into force on 1 January 2018.

The Federal Council also decided that the new regime regarding mail-order will not come into force until 1 January 2019, as Swiss Post needs more time to implement the statutory provisions for technical reasons.

Under this regime, the customers will no longer have to pay the taxes and fees levied by Customs upon importation, but it will be a duty of the mail-order companies to bill customers for VAT if the mail-order annual turnover from small consignments (that are import-tax-free) is at least CHF 100,000.

This will result in a removal of the VAT-related competitive disadvantages for domestic companies. The Federal Council estimated to increase in receipts for about 70 CHF million per year.

Finally, the Federal Council reminds that the adjustment of the tax rates envisaged under the reform of pension insurance 2020 is not the subject of this revision. Since tax rates are established in the Federal Constitution, the swiss people will be called to vote on the federal decree on the additional funding of the AVS through the VAT increase on 24 September.