VAT Rates in Switzerland
VAT Rates in Switzerland
Similarly, certain supplies are VAT exempt. For example, certain health services, financial services, insurance, education and training, certain cultural services, supplies connected with immovable property, etc. These are regulated under Art. 21 Swiss VAT Act. Taxpayers may opt to tax some of the exempt supplies without credit from Art. 21 (Art. 22 Swiss VAT Act).
VAT Deduction Limits in Switzerland
Input VAT is generally deductible as long as the goods or services are used for business purposes.
However, there are special rules:
- Exempt transactions: Supplies of services and imports of goods used for the supply of services that are VAT exempt do not allow for the deduction of input tax, unless the taxable person has opted for their taxation (Art. 29 Swiss VAT Act.). Another exception would be in case the
- Passenger car used both for private and business purposes: Initially, all input VAT can be deducted via the VAT return; however, the taxable person must account for the VAT corresponding to the private use of the car and petrol in the last VAT return of the year. In case the taxpayer is involved in exempt transactions, fully or partially, no input VAT deduction is allowed.
- Holding participations.
A valid and fully compliant VAT invoice must be issued for each expense on which VAT is deducted.
Statute of Limitations in Switzerland
The statute of limitations is five years in Switzerland, although this period can be interrupted both by the taxpayer and by the administration. A written request, ruling, decision or the start of an audit can interrupt the statute of limitations. The absolute period of the statute of limitations cannot exceed ten years from the end of the tax period in which the tax point took place.
When it is the taxpayer who interrupts the statute of limitations, then the statute of limitations runs again for five years, whereas in case it is the tax administration who interrupts it, it runs again for two years.
The statute of limitations period determines the periods on which the tax authority can go back to review the information declared, and apply additional VAT assessments, penalties or interests.
The statute of limitations also determines the period a taxpayer can voluntarily correct any errors on past submissions, as well as deduct input VAT.
This is regulated in Art.42 and Art.91 of the Swiss VAT Act.
Tax Point Rules in Switzerland
The tax point is the time when VAT becomes due. VAT due should be distinguished from VAT payable. VAT is due when the tax point occurs. VAT is payable between the day after the end of the reporting period and the due date to submit and pay the VAT return.
- General rule: The tax point is by the time of issuing the invoice.
- Partial payments: Tax point is considered to have occurred by the time of issuing the partial invoice, or by the time of receiving the partial payment.
- Advanced payments: The tax point takes place by the time the payment is received.
- Self-supplies: the tax point is by the time the self-supply takes place.
- Import: Tax point occurs when the goods are imported according to the relevant import documents.
Swiss Bad Debt Relief
Bad debt refers to an unpaid invoice for which the Supplier has paid the VAT to the tax administration: this is, an invoice has been issued with VAT, reported in the VAT return and the VAT amount has been paid to the tax authorities but the whole price has not been collected from the customer. This is often due to the client´s bankruptcy, insolvency or simple missed payments to suppliers. In these cases, most countries offer the possibility to recover the VAT initially paid to the authorities, however, the conditions vary from one country to another.
Bad debt relief refers to the possibility of recovering the VAT from that invoice. Switzerland allows for bad debt relief. The condition is that the debt is written off in the accounts and it is booked as a bad debt from an accounting perspective.
There are no other particular rules apart from the accounting principles. Therefore, the taxable amount shall be reduced according to the VAT corresponding to a bad debt by way of correcting the payable VAT in the corresponding VAT return.
