The Swiss VAT Ordinance as well as VAT Leaflet No. 18 “Refund Procedure” have been updated as per 1 January 2019. The rules as announced on 17 September 2018 in the draft brochure with respect to refund of input VAT incurred prior to a mandatory VAT registration for foreign persons have fully been implemented. Authors: Silke Hildebrandt-Stürmer, Romy Müller


With our blog post dated 7 June 2018 (“New set of rules when to become liable in Switzerland”) we informed about the newly introduced principles how persons / entrepreneurs can determine a VAT registration liability according to the new Swiss VAT Law effective as of 1 January 2018. These principles applicable for foreign persons can be summarized in brief as follows:

VAT liability of companies domiciled abroad

According to Art. 10(1)(a) Swiss VAT Law an entrepreneur domiciled outside Switzerland becomes liable to register for Swiss VAT purposes if it – in addition to reaching the worldwide turnover limit of CHF 100,000 per year – generates a turnover in connection with a taxable supply in Switzerland. In other words, a foreign company only becomes subject to mandatory registration in Switzerland if it generates an annual global turnover of more than CHF 100,000, from which at least turnover of CHF 1 is generated by taxable supplies on the Swiss territory. A foreign entrepreneur can make use of an exemption from the registration liability if it only provides supplies that are exempt from VAT with credit (e.g., exports) or without credit (e.g., return on investment).

Exemption from VAT liability

If services are provided to recipients established in Switzerland, which are taxable for the recipient of the service (Art. 8(1), Swiss VAT Law) VAT on the corresponding services is reported within the scope of the reverse charge by the recipient. Thus, if a foreign supplier only supplies services within the application of the reverse charge mechanism, an exemption from the VAT liability is granted.

Companies domiciled abroad that provide telecommunications and/or electronic services to non-taxable recipients as well as services in accordance with Art. 8(2), Swiss VAT Law, are still not exempted from the obligation to register. Likewise, work on movable goods which does not qualify as a provision of services in Switzerland but rather as a supply of goods, leads to mandatory VAT liability for foreign companies if they generate a worldwide turnover of more than CHF100,000 per year.

Tax liability for companies domiciled abroad and applicable procedure for input VAT recovery

Art. 14(1)(b), Swiss VAT Law stipulates that the mandatory tax liability for foreign companies shall commence when a supply is provided for the first time on Swiss territory, if at this point in time it can already be expected that the worldwide turnover threshold of CHF100,000 per year will be exceeded within the next 12 months.

The wording of the law leaves room for interpretation, especially for the determination of the “first supply” on Swiss territory. The options, which are discussed at the moment in length are:

  1. Issuance of the first invoice related to the supply,
  2. Starting with physical work,
  3. Submitting an offer?

A final communication respectively confirmation from the Swiss VAT Authorities has not yet been published. However, as of 1 January 2019 Art. 154(2) Swiss VAT Ordinance has been updated and clearly states now, that input VAT incurred prior to a mandatory VAT registration has to be recovered via the refund procedure. The respective application must be filed together with the 1st regular VAT return.  In its respective publication VAT Leaflet No. 18 “Refund Procedure” the Swiss VAT Authorities specify that in order to guarantee equal treatment of all applicants there will be accepted refund applications within the limitation of the ordinary refund procedure. This means application should be accepted if handed in within 6 months after the previous calendar year has expired.


Implications and potential uncertainties

Given the above, it is absolutely crucial to carefully determine the effective date of a VAT registration for foreign companies. This is because in contradiction to the past it seems not possible any more to register a foreign entrepreneur retrospectively for the entire tax period, i.e. calendar year, and to include the input VAT incurred in the first regular VAT return. Moreover, the input VAT incurred prior to the correct VAT registration has to be recovered via the refund procedure, which is strictly limited to a period of 6 months after the expiration of the calendar year in which the input VAT has been incurred. This means also that input VAT will become a cost in case the effective VAT registration date has been determined incorrectly and subsequently the applicable refund procedure deadline has been passed. The EY Indirect Tax team would be happy to assist with the questions around VAT registration and input VAT recovery.