Mythes about Swiss VAT

Experiences show that a standard attitude of foreign companies is to assume that the Swiss VAT system applies the same concepts and rules as the VAT system of their home country. However, this is not case.

The Swiss VAT system has peculiarities that makes it distincting from foreign VAT systems, for example:

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• concept “supply of goods”: what Switzerland considers as a supply of goods may be considered a supply of services by other VAT systems. As a consequence the place of supply and the implications for VAT liability may differ accordingly.
• reverse-charge: Switzerland does not apply the reverse-charge mechanism as widely as applied by other countries. Instead, Switzerland applies reverse-charge for specific supplies of goods or services and under specific conditions.
• VAT refund: due to the limited application of the reverse-charge mechanism, a substantial number of foreign companies will be considered to make domestic supplied within Switzerland and therefore not entitled to Swiss VAT refund. The fact that a foreign company has been charged correctly Swiss VAT does not mean that foreign company is entitled to recover the paid Swiss VAT by applying the VAT refund procedure for foreign companies.
• zero-rate at export: when a good is exported within 48 hours, the underlying supply of goods is according to the practice of the Swiss tax authorities considered to be an export supply. For example:
  • a car purchased in Switzerland and exported within 48 hours; or
  • repair work on a car or bus, whereas the car or bus is exported or leaves the country within 48 hours afterwards.

In these situations Swiss VAT shall not be charged. This practice applied by the Swiss tax authorities makes it almost impossible for foreign companies to recover their paid Swiss VAT. Namely, in the scope of the Swiss VAT refund procedure the Swiss tax authorities refuse refund as they argue that the zero rate should have been applied. However, in most situations, foreign companies are not able to proof export from Switzerland as they were not aware of this tax practice and did not take the necessary precautions.

By verifying the Swiss VAT consequences of sales or purchase transactions before they are agreed, a foreign company can prevent to be confronted afterwards with not expected implications. Verifying the VAT treatment of transactions is possible by consulting the information published by the Swiss tax authorities or by consulting a VAT specialist with knowledge about Swiss VAT.

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