Every time you purchase services from a Swiss company, you automatically pay value added tax as this is included in the price tag. When you purchase services from a company outside of Switzerland, you may have to pay acquisition tax. An acquisition tax is a tax levied by a country on goods and services provided by a foreign service provider which is not registered to pay value added tax (VAT) in that country.
In Switzerland, acquisition tax (German: Bezugsteuer, French: Impôt sur les acquisitions) is levied when a Swiss tax resident purchases services provided by a foreign company which does not pay Swiss VAT. It is also levied on goods provided by foreign companies when import taxes cannot be levied on these by Swiss customs offices upon import.
Who has to pay acquisition tax?
Companies (including sole proprietorships) which are registered to pay VAT in Switzerland must pay acquisition tax when they purchase goods and services from foreign entities which do not pay Swiss VAT. Non VAT-eligible Swiss tax residents (companies and private individuals) are required to pay acquisition tax when they access more than 10,000 Swiss francs worth of foreign services which would normally be subject to Swiss VAT in one calendar year.
In the case of Swiss companies which calculate VAT based on the effective VAT rate rather than the net VAT rate, acquisition tax owed can be categorized as input tax which can be deducted from VAT owed to the tax office. In this case, the acquisition tax is covered by the VAT paid by end customers. Companies which use the net VAT rate model must use effective VAT rates when calculating acquisition tax, rather than the net VAT rate.
What services does acquisition tax apply to?
The acquisition tax is primarily a tax on immaterial services provided by foreign service providers which are not registered to pay VAT in Switzerland. Because foreign services have become an increasingly important part of everyday life, acquisition tax has become increasingly relevant.
Acquisition tax is levied based on the place in which the consumer of foreign goods and services is domiciled. That means that a Swiss tax resident which purchases foreign goods and services must pay tax in Switzerland, even if the goods and services themselves are provided outside of Switzerland. For example, Swiss tax residents are liable to pay acquisition tax on consultation services provided entirely outside of Switzerland, even if the services have no link to Switzerland other than the fact that they are accessed by Swiss tax residents.
Examples of services which must be declared by consumers for acquisition tax purposes include:
1. Data services. The current law governing acquisition tax requires recipients to pay acquisition tax on services imported into Switzerland via data carriers, even when the data carriers themselves do not have any market value. This law leaves some room for litigation with regards to accessing services offered by foreign entities using the Internet as a data carrier.
2. Advertising services. When a Swiss tax resident makes use of foreign advertising service providers, they are required to pay acquisition tax in place of the VAT which applies to advertising services.
3. Consultation services. When a Swiss tax resident makes use of foreign consultation services – including legal services, asset management services and trust services, among others – they they are required to pay acquisition tax on those services.
4. Data management services. Acquisition tax must be paid for services related to data management which are provided by foreign service providers.
5. Human resource services. Swiss tax-residents which make use of foreign human resource services are required to pay acquisition tax corresponding to the cost of those services.
6. Provision of immaterial rights. Services which provide you with rights to immaterial services or immaterial property are subject to acquisition tax.
Which goods does acquisition tax apply to?
When material goods are imported into Switzerland, VAT is normally levied by customs services upon import. For this reason, acquisition tax rarely applies to imported goods. It does apply when, for any reason, the nature of the goods or the way in which they are imported makes levying import tax upon import impracticable.
Material goods sourced in Switzerland by a foreign service provider which is not registered for VAT may, in some cases, be subject to acquisition tax.
Example: You run an interior design business and you hire a foreign service provider to remodel a home. You provide all the necessary materials and tools which means that the remodelers do not have to transport these across the border and pay relevant import taxes. Because the remodeling service is delivered in Switzerland by a foreign entity which does not pay Swiss VAT, you may have to pay acquisition tax on the materials which make up part of the service (remodeling).
Not all services provided to tax-eligible Swiss entities by foreign service providers are subject to acquisition tax. For example, Swiss tax residents are not liable to pay acquisition tax on services received from foreign hospitality service providers such as hotels and restaurants. As a general rule, material services which are both provided and consumed in another country are not subject to acquisition tax because the service provider must pay VAT on these services in the country in which it is domiciled.
How do I know when I have to pay acquisition tax on a service?
In order to determine whether or not acquisition tax must be paid on a purchased service, you must determine whether the service provider is charging you Swiss VAT and passing on the VAT charged to the Swiss tax authorities.
When Swiss VAT is charged, this will normally be clearly stated on invoices. If invoices do not clearly indicate that Swiss VAT has been charged, then it most likely has not. It is also worth noting that even when Swiss VAT is included on your bill, you have no guarantee that the service provider is in fact passing the VAT charged on the Swiss tax authorities.
Foreign service providers which are not liable to charge and pass on Swiss VAT may still do so as a value added service, but they are not in any way obligated to. The onus rests on you as the recipient of services to set aside acquisition tax corresponding to your purchases. Acquisition tax should be declared on your Swiss VAT tax returns.
How high is Swiss acquisition tax?
Swiss acquisition tax mirrors Swiss VAT. The standard VAT is 7.7%, with special rates of 3.7% (hospitality services) and 2.5% (basic commodities) applicable to certain types of goods and services.