Swiss VAT: a system similar to the EU and yet with many differences

Swiss VAT: a system similar to the EU and yet with many differences

Fri 22 Apr 2022

The Swiss and European VAT systems are similar in many respects, but there are also differences that can lead to serious adverse tax consequences.

Switzerland, for the most part, follows unilaterally the same broad lines as neighboring countries, thus trying to avoid VAT mismatches.  However, when European countries have transposed the EU Directive they have taken the opportunity to establish their own rules where the Directive left room for manoeuvre.

The conditions for VAT liability in Switzerland: A unique and worldwide turnover threshold

In Switzerland, the main condition for registration is to carry out economic activity on Swiss territory whilst having an annual (calendar period) worldwide turnover of more than CHF 100,000.

In Europe, the Directive does not mention a specific transaction that obliges companies to be subject to VAT. It is sufficient to be a business. Each Member State has then defined national thresholds.  In this sense, each EU member state and Switzerland have set their own VAT registration threshold depending on their respective legal system.

One-stop-shop system: a reality since the beginning of VAT in Switzerland.

Recent changes have brought about modifications in the context of B2C e-commerce in Europe. The OSS and IOSS  (Import One Stop Shop) systems have been introduced with the main aim of taxing consumption in the country of destination using a centralized registration.    In comparison, VAT in Switzerland is a federal tax that is ‘already’ applicable to every canton homogeneously. Therefore, there is no need to get such an OSS system as in the EU.

The distinction between the supply of goods and provision of services is a key element for determining the VAT place of supply and VAT treatment.

The Swiss and European VAT systems do not always agree when it comes to defining these two essential notions in the VAT context.

In the Swiss VAT Act, the supply of goods can be defined in several ways: the power to dispose economically of goods in one’s own name, goods on which work has been carried out, or rentals. In contrast, the EU Directive considers the supply of goods to be only a transfer of the right to dispose of tangible property as owner.

Therefore, different definitions may apply to the same cross-border transaction in a Swiss and an EU jurisdiction. Although this difference in interpretation may result in similar tax treatment, the divergence can also lead to cases of double taxation or double non taxation. This is why it is very important to check every detail in each specific case.

Intra-community transactions: an unknown area for a country that keeps its borders.

Intra-community VAT borders were abolished on 1 January 1993 with the advent of the single European market. Since then, the EU B2B market has benefited from a VAT declaration instead of a VAT collection system. This system, which is basically there to simplify the VAT taxation of intra-community transactions, can create complexities that can be prone to fraud. The European authorities are considering changes to tackle the problem of fraud.

In contrast, Switzerland is outside the EU and cannot benefit from EU intracommunity simplifications.  As a consequence, Switzerland still deals with importations/exportation for each international traffic of goods transaction. Granting of VAT refund from a Swiss perspective

When VAT is borne in connection to the conduct of commercial activities in a different country, its refund is often an outstanding point. Switzerland has entered into bilateral reciprocity agreements in order to allow, under certain conditions, the reimbursement of the levied tax to foreign VAT registered taxpayers.  There is also a system by which non-EU established businesses can obtain refunds of EU VAT in certain circumstances.

Tax representation in Switzerland: an intermediary who is not a debtor

Companies based outside the Swiss frontiers and subject to VAT in Switzerland are obliged to be fiscally represented in order to deal with their local liabilities and rights. The tax representative in Switzerland is only an intermediary and will not be responsible for any tax liabilities. European countries vary in their approach to the requirement for fiscal representation for VAT.

VAT group in Switzerland

The Swiss VAT Act considers that a holding company, by acquiring, holding, and disposing of qualified participations, can have its group activities considered as a single economic activity subject to VAT. In Europe, there is no fixed rule in the Directive. However, an option is available for each Member State to decide whether or not to apply it.


There are differences between the European and the Swiss VAT systems which may lead to cases of double taxation. This potential double taxation can be avoided in some cases if special care is taken but sometimes there is no way to avoid it. For that reason, although Swiss VAT is not dependent on the EU Directive, Switzerland is doing its utmost to keep the Swiss VAT system compatible with the EU system and thus avoid any adverse tax consequences.