Value-Added Tax (VAT)

In Switzerland, value-added tax (VAT), which is known as Mehrwertsteuer (MWST) in German, developed from the revenue tax which was introduced in 1959.

The Swiss revenue tax was replaced by a value-added tax on January 1, 1995, a full 40 years after the revenue tax was introduced. Today, the VAT represents the single most important source of income for the Federal Government. In 2014, VAT added 22.6 billion Swiss francs to state coffers.

In contrast to a revenue tax, VAT does not apply to all revenues, but only to the added value gained by the taxpayer. The company being taxed does not pay VAT on the cost of services provided by other companies. In tax jargon, these VAT-deductible costs associated with providing services are referred to as “exemptions with the right to deduct”.

Since 2011, the standard Swiss VAT has been 8% until December 2017. From January 2018, the Swiss VAT is 7.7%.

However, in Switzerland a number of services are subject to either limited or no VAT. These include services in the fields of healthcare, education, real estate and culture.

As a rule, companies in Switzerland with revenues of less than 100,000 francs per year are not required to pay VAT. Companies which do not yet earn eligible revenues, but expect to do so in the future, should register for VAT.

In addition to the conventional VAT models, a special VAT model applies to small-and-medium-sized enterprises (SMEs) with revenues of up to 5.2 million francs. In this model, SMEs have the option of paying VAT as a lump sum. In this case, the entire VAT owed is paid in one go at a discounted rate. This lump-sum VAT to be paid depends on the nature of the relevant company’s business. The benefits of this lump-sum arrangement lie in its simplicity and the minimal administration required, among others.

Certain banking services, such as custody fees for securities accounts, are subject to VAT.

More on this topic:
Swiss tax forum

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