News: changed VAT rates as of 1st January 2024
Increase of VAT rates as of 1st January 2024
Starting January 1, 2024, the following VAT rates are applicable in Switzerland:
- standard rate: 8.1%.
- reduced rate: 2.6%.
- special rate for accommodation: 3.8%.
Application of increased tax rates
General
The applicable tax rate is not determined by the date of invoicing or the date of payment, but by the date on which the supply was made.
In the case of periodic services (e.g. subscriptions), the period in which the supply is made is decisive.
Tax rates 2023 or tax rates 2024?
Supplies made up to 31 December 2023 will be subject to the tax rates in force until the end of 2023 (i.e. 7.7%, 2.5% and 3.7%). Supplies made from 1 January 2024 on will be subject to the new tax rates.
If supplies are invoiced in the same invoice which, because of the period in which they are made, are subject to both the old and the new tax rates, the date or period of the supplies and the portion of the amount attributable to the corresponding period of time must be shown separately.
If this is not the case, all invoiced supplies must be charged at the new tax rates.
The correct allocation of supplies to the old and new tax rate can also be demonstrated in another way.
Tax amount stated too high
The person who mentions an excessive amount of tax in an invoice for a supply will owe the tax specified in the invoice. This is the case if an invoice states the new tax rates for supplies made before 1 January 2024.
A retrospective adjustment of the tax from the new tax rates by the old tax rates can only take place if the adjustment is made in accordance with the Swiss VAT Act (Article 27 Par. 2 letter MWSTG), and the person making the supply can credibly demonstrate that the Swiss Exchequer has not suffered any tax loss as a result of the erroneously invoiced higher turnover tax.
Partial invoices and partial payments
General
A partial payment is deemed to have been made if, at the time the tax claim arises, only that part of the supply to which the payment relates but not the entire supply has been made.
Partial payments for supplies made no later than 31 December 2023 will be invoiced at the old tax rates and settled at those rates with the Swiss tax authorities.
Partial payments for supplies made from 1 January 2024 on must be invoiced at the new tax rates and settled at those rates with the Swiss tax authorities.
Partial invoices and situation budgets
It is recommended to already correctly delineate contracts, which have not yet been completed, in the partial invoices and situation budgets by the end of 2023 (e.g. in the building industry).
The deliverables started should be listed in detail in terms of type, subject, scope and time (or period).
In the case of construction work, the time of supply is the time at which work is carried out on the building (e.g. assembly, relocation or fixing).
Not considered as carrying out work on the structure are the prefabrication work in the workshop.
Advance payments or invoices for advance payments
An advance payment exists if, at the time the tax claim arises, no supply has yet been made.
If in 2023, at the time of the advance payment or advance invoice, it is already known that all or part of the supply or service will take place after 31 December 2023, the part of the performance to be allocated to the period from 1 January 2024 on can be invoiced to the customer with the new tax rate in the invoice. In that case, the VAT return will already declare that supply at the new tax rate.
Periodic supplies, partly made at new rates
Subscriptions for transport services (e.g. half fare cards and general travel cards or ski passes) or service and maintenance contracts for lifts, machinery, computer systems and the like must generally be paid in advance.
Basically, if such a subscription or contract continues beyond the date of the tax increase, the consideration should be divided pro rata temporis (divided over time) between the old and the new tax rate.
If the provider of the service does not know at the time of the sale whether it will perform the service by 31 December 2023 at the latest, or only thereafter, because the purchaser of the service will determine the timing of the service (e.g. in the case of the sale of tickets for multiple trips) and because the validity date is not explicitly after 31 December 2023, then exceptionally the time of sale will determine the applicable tax rate.
In the case of periodic supplies, there are cases where the provider of the supply at the time of sale until 31 December 2023 cannot know when he will make the periodic supply.
However, if in such a case the provider of the service knows that the service will be provided for at least a certain period of time after 31 December 2023, this minimum period of time will, by way of exception, be decisive for the distribution of the remuneration pro rata temporis.
For VAT purposes, ancillary supplies are treated in the same way as the main supply, i.e. they follow the VAT treatment applicable to the main supply.
Reduction of the consideration, sales bonuses, returns and reversal of supplies
Reduction of the consideration
Reductions of the consideration (discounts, rebates, notices of deficiencies or losses) for supplies from the period before 1 January 2024 must be adjusted by applying the old tax rate.
The recipient of the credit note who declares VAT returns based on the effective method (= normal method) must correct the input tax deduction by the tax amount shown on the credit note.
Sales bonuses
Credit notes for turnover (e.g. annual bonuses or other rebates) relating to the period before 1 January 2024 should be treated as a reduction of the consideration, with the application of the old tax rates.
The recipient of the credit note who declares VAT returns based on the effective method (= normal method) must correct the input tax deduction by the tax amount shown on the credit note.
Returns and reversal of supplies
Returned goods and reversals of supplies should be treated as reductions of the consideration with application of the tax rates applicable at the time, or the period during which, the supply was made.
The recipient of the credit note who declares VAT returns based on the effective method (= normal method) must correct the input tax deduction by the tax amount shown on the credit note.
Impact of tariff change on other cases
Hotel and hospitality industry
The following rules apply to the overnight stay from December 31, 2023 to January 1, 2024:
- accommodation must be charged at the old tax rate.
- hospitality services (e.g., New Year's Eve party) are charged at the old tax rate.
Year-end package arrangements should be split pro rata. If only one invoice is issued, the services relating to 2023 and those relating to 2024 should be kept separate.
Contracts for rental or lease
If the period of supply in connection with a installment partially covers a period after December 31, 2023, a pro rata temporis split between the old and new tax rates should be made.
In the case of long-term contracts that extend beyond the end of the year, it is recommended that a written adjustment will be issued to the customer detailing the tax rates applicable as of Jan. 1, 2024.
Transactions with commission agents
In the case of commission trading pursuant to Articles 425 - 439 Swiss Civil Code, the principal does not deliver the goods until the commission agent has passed on the goods or has declared himself to be acting as substitute.
If the commission agent makes the supply before Dec. 31, 2023, or acts as substitute, the principal is liable for VAT at the old tax rate.
VAT on aquisitions
In the case of supplies subject to VAT on acquisitions (Article 45 MWSTG), only the time of the acquisition is decisive for the tax rate to be applied. The date of payment or invoice date is not decisive.
If the same invoice mentions supplies that are subject to both the old and new tax rates by virtue of the period in which they are supplied (or the period in which they are acquired), then the date on which or the period in which the supplies are made, as well as the portion of the amount attributable to each, must be shown separately.
Import of goods
The new tax rates apply to all imports of goods for which the tax amount of the VAT due at import arises on Jan. 1, 2024, or later.
Input VAT
Invoiced domestic tax may be deducted in the course of business activities, and in accordance with applicable provisions on the right to deduct input tax.
If the provider of the supply -with reference to the original invoice with the incorrect tax rate- afterwards invoices the tax difference, the recipient of the supply can deduct the input tax on it.
Particular care must be taken with accounting systems that automatically calculate deductible input tax to ensure that the correct tax rates are applied.
The VAT return
Taxpayers who declare VAT on the basis of the so-called effective method (= standard) can for the first time declare turnover applying the old and new tax rates in the VAT return for the 3rd quarter of 2023.
Consideration to be declared at an earlier settlement, but relating to supplies provided after 1 January 2024, should initially be declared at the old tax rates. They can be declared at the earliest in the return for the 3rd quarter of 2023. An adjustment must be made no later than at the time of completion of the 2023 tax period.
If the adjustment is already made in a VAT return for the second half of 2023 and the tax amount is paid on time, no default interest is due. However, if the adjustment is only made at the time of finalisation with the adjustment return for the 2023 tax period, default interest is due. If, however, the interest amount does not exceed CHF 100, then generally no default interest will be charged.
In the case of an adjusted quarterly return, interest on late payments is generally calculated based on the average due date. In the case of quarterly returns, this is 15 October 2023. In the case of quarterly returns, interest is calculated from 16 October 2023 to the time of payment (using the commercial interest method, i.e. 30/360 rule).
If a taxpayer's fiscal year differs from the calendar year and the end date for the fiscal year ending in the 2023 tax period expires before January 1, 2024, the adjustment must be made no later than with the last (regular) return for the 2023 tax period (filing date no later than February 29, 2024).
