Only a few months ago, Switzerland increased its VAT rates and at the same time abolished customs duties on imports of industrial products. And the next changes are already in the pipeline with the partial revision of the VAT Act 2025. Some of the modifications are designed to tighten the rules, while others are intended to close existing competitive distortions and tax loopholes.
The legislator is stepping up the pace of digitalisation and introducing supposed simplifications as well as various instruments to combat fraud more efficiently. Although the final decision on the entry into force of the new provisions is still pending, they are expected to be introduced on 1 January 2025.
The administrative directives from the Federal Tax Administration (FTA) on the various measures are still pending, but in view of the tight schedule, we are already highlighting the likely need for action.
Trading in emission rights and certificates
Trading in emission rights and certificates as well as other certificates for emission reductions is already subject to VAT. In the past, anyone who traded such rights and certificates was obliged to pay VAT. In the case of foreign sellers who were not registered for VAT in Switzerland, the domestic purchaser had to account for VAT through the reverse-charge mechanism. All trading in such rights and certificates, with both domestic and foreign counterparties as sellers, will now be subject to reverse-charge mechanism. For the first time, purely domestic transactions will be subject to this mechanism.
Need for action
Sellers of emission rights and certificates:
- From 1 January 2025, VAT may no longer be charged and disclosed on the invoice
- Necessary system modifications
Purchaser of emission rights and certificates:
- From 1 January 2025, mandatory obligation to apply the reverse-charge mechanism
Taxation of electronical platforms
In order to understand the changes in the area of the taxation of electronical platforms, it is necessary to look back to the calendar year 2019. At that time, Switzerland implemented changes aiming on distance selling companies. These were obliged to register and account for VAT if they delivered low value consignments to Switzerland. In the case of low value consignments, VAT is not levied on importation since the value of the goods ordered is too low and the collection costs are too high. Switzerland’s low value consignment relief (LVCR) applies if the import VAT does not exceed CHF 5. The 2019 amendment resulted in a significant number of foreign sellers, mainly selling goods to Switzerland via their own web shop, registering for VAT in Switzerland and since then invoicing like a domestic company.
However, these efforts are not enough. This is because the number of low value consignments from abroad is constantly increasing. This may be because foreign suppliers do not fulfil their tax obligations in Switzerland, because the value of the goods declared for shipment is too low, or because the sale is made via a so-called electronic platform on which the consumer orders the goods, but the platform is not legally involved in the sale.
With the changes from 1 January 2025, sales made by individual sellers through a domestic or foreign platform will now be attributed to the platform for VAT purposes. The platform will now be officially designated as the seller liable for VAT and will have to remit the VAT on the sales to the FTA.
Until December 31st, 2024
From January 1st, 2025
Under civil law, the individual seller remains liable for the supply of the goods, and all consequences resulting from the sales contract entered with the client such as warranty, complaints, returns, etc. remain in force. The involvement of the domestic or foreign electronical platform into the supply chain is only fictitious and therefore only intended for VAT purposes. The platform assumes the billing and procedural obligations towards the FTA that would actually be the responsibility of the individual seller.
The implications for sellers and electronical platforms should not be underestimated. For example, in the area of invoicing: Legally, the seller is responsible for issuing the invoice to the buyer, but the invoicing of the VAT amount is to be carried out by the platform, which is not involved in the underlying sales transaction with the buyer. If the seller has a Swiss VAT registration, the invoicing between seller and buyer remains unchanged in principle, but VAT may no longer be shown on this invoice. The seller, who is liable for VAT, will no longer have to pay VAT on its sales made through an electronic platform in future. His transaction will be zero-rated because the obligation to account for the VAT is taken over by the platform. Questions also arise with regard to payment: To whom should the buyer pay the VAT? To the seller, who does not owe the VAT amount to the FTA, or to the operator of the platform, with whom the buyer does not enter into a contractual relationship? If the platform is involved in the payment processing between seller and buyer, it will only forward the net amounts to the sellers, but retain the VAT amount and pay it to the FTA. If the seller is not liable for Swiss VAT or if the payment is not processed through the platform, such transactions become virtually impossible to manage. The seller issues his invoice without showing VAT, while the platform has to settle the VAT owed on the sale. Alternatively, the platform must take care of invoicing the VAT on the seller’s turnover. The practical implementation of this new provision will be particularly challenging for platforms, as they will have to adapt their systems within a few months of the FTA issuing its administrative instructions and thus become fulfilment agents of the FTA.
However, sellers who sell their goods to buyers in Switzerland via a platform are not released from all VAT obligations. They are subordinately liable for the VAT amounts to be accounted by the platform and therefore bear a risk if the platform operator does not comply with the new registration and settlement obligations.
The impacts of the new rules is not even limited to buyers. If an order is placed with an electronic platform based abroad that does not fulfil its VAT registration and invoicing obligations in Switzerland, there is a risk of import bans and, in the worst case, confiscation and destruction of the ordered goods without compensation. It is therefore possible that buyers may pay for goods ordered but never receive them and then have to claim their money from the foreign seller.
Operators of electronic platforms offering only services will also be affected by the proposed changes. However, their obligation is limited to providing information to the FTA. Finally, the treatment of C2C (consumer-to-consumer) platforms has not yet been fully clarified.
The subject is complex and the up administrative publications of the FTA must be considered.
Need for action
Vendor of goods via platforms:
- Evaluate necessary adjustments to your own system
- Evaluation of the platform sales channel
- Legal aspects between vendor and platform
Platform operators:
- Follow-up of requirements following the announcement of the FTA’s administrative practice
- Examination of a VAT registration requirement in Switzerland
- Clarification of technical adaptations
- Adaptation of the general terms and conditions
Operator of own web shops:
- Assessment of the VAT implications of offering third party products
New VAT exemption in the area of medical treatment services
Coordinated care services, also known as managed care services, will no longer be subject to VAT. This means that another piece of the healthcare puzzle that was previously subject to VAT will benefit from the tax exemption.
Need for action
Providers of managed care services (gatekeepers):
- Follow-up to the requirements following the announcement of the FTA’s administrative practice on the distinction between managed care services and other administrative services
- From 1 January 2025, adjustment of invoicing
- Assessment of VAT liability
- Calculation of the correction of input VAT under the capital goods scheme
Health insurance companies:
- Verification of invoices issued by gatekeepers
- From 1 January 2025, the gatekeeper’s VAT liability must be verified should the health insurance company issue credit notes
New VAT exemption in the area of culture
The VAT treatment of fees paid for attending cultural events will be harmonised with that of fees paid for attending sporting events, which are now also exempt from VAT.
Need for action
Organiser of cultural events:
- Follow-up to the requirements following the announcement of the FTA’s administrative practice
- Assessment of VAT liability of previously VAT registered organisers
- Calculation of the correction of input VAT under the capital goods scheme
- New regulations to be considered for the organisation of 2025 events
New VAT exemption for services rendered to investment foundations
The VAT exemption for supplies made to investment foundations removes a 25-year difference in treatment between supplies to collective investment schemes and investment foundations. Supplies to investment foundations will now benefit from the VAT exemption, which should result in lower costs. Service providers working for investment foundations and providing delegable management services or acting as custodian banks will in future be able to invoice their services without charging VAT.
Need for action
Investment foundations:
- Review of the administrative and custodian services currently subject to VAT
- Review and amendment of existing contracts
Service providers (lawyers, tax consultants, custodian banks, property valuers, etc.):
- VAT assessment of services provided to investment foundations
- Review and amendments of existing contracts
- Calculation of the correction of input VAT under the capital goods scheme
New VAT exemption for travel agency services
Travel agency services, to the extent that they consist of the resale of travel services and related services, are now exempt from VAT. The exemption only applies to domestic tourism. This means that the travel agency’s margin on domestic travel will no longer be subject to VAT.
Need for action
Travel agencies:
- Follow-up to the requirements following the announcement of the FTA’s administrative practice
- Calculation of the correction of input VAT under the capital goods scheme
Possibility of annual filing of the VAT return with provisional VAT payments
Under the heading of “simplification”, Switzerland is now also introducing the option of an annual VAT return. This option is only VAT payers with an annual turnover not exceeding of CHF 5,005,000. The fact that the FTA will provisionally collect the VAT due in the case of annual invoicing should come as no surprise.
Need for action
Companies with a turnover < CHF 5,005,000:
- Assessment of whether annual invoicing from 2025 onwards will lead to a simplification of administrative procedures
Joint liability and possible obligation to provide financial security for members of executive bodies
Members of executive bodies (board of directors, management board, foundation board) face additional tax risks. Joint liability and the obligation to provide security for taxes, interest and costs now apply if a person has been a member of the executive bodies of at least two other legal entities that have gone bankrupt within a short period of time and there are indications that this person has committed criminal offences in connection with these bankruptcies. Although the hurdles for claiming joint liability and the obligation to provide security are high, the due diligence check before accepting a mandate or appointing a new member must now also cover this point.
Need for action
Companies:
- Considering other mandates or activities held by the member concerned
Members of executive bodies:
- Conducting due diligence reviews of new and existing mandates
Conclusion
Many of the specific adjustments are welcome and will certainly help to eliminate existing distortions of competition. However, there are considerable doubts as to whether the legislator has chosen the right way to close the existing tax loopholes with platform taxation. This is because the technical hurdles are high and the Swiss market is probably too small to really motivate large foreign companies to comply with these new regulations.
For concrete implementation measures and recommendations, it is essential to take a look at the administrative guidelines currently in preparation.