Value added tax Switzerland: How value added tax works (2025)
1. value added tax Switzerland: overview and legal basis
Value added tax (VAT) is a general consumption tax that is passed on to the end consumer. In Switzerland, consumers pay VAT on the purchase of goods (clothes, cars, food, etc.) and services (hairdressing, transport, restaurant visits, etc.). The tax is levied exclusively by the federal government and is used to cover general federal expenditure. The legal basis for this is the Swiss Value Added Tax Act (MWSTG).
As a company, you must add VAT to the price of the services you provide and products you sell in Switzerland and transfer it to the federal government (Federal Tax Administration). In return, you can deduct the input tax paid as part of your business activity from this amount.
Current VAT rates in Switzerland (as at 1 January 2024)
| Tax rate | Height | Area of application |
|---|---|---|
| Standard rate | 8,1% | All deliveries and services in Switzerland that are not subject to a different rate |
| Special rate | 3,8% | Accommodation services (hotels and parahotels) including breakfast, in accordance with Art. 25 VAT Act |
| Reduced rate | 2,6% | Food, non-alcoholic drinks, books, newspapers, magazines, medication, admission to sporting and cultural events |
2. registration obligation (turnover threshold & exceptions)
In principle, all companies are subject to VAT regardless of their legal form. An exception applies if:
- Your turnover from taxable supplies (deliveries and/or services) within one year is less than CHF 100,000 amounts to
- For non-profit sports and cultural organisations and non-profit institutions, the turnover limit is CHF 250,000
If your turnover is below these limits, you are exempt from VAT. Important: If you do not pay VAT, you cannot claim input tax.
Voluntary subordination
Even if you are below the turnover threshold, you can voluntarily subject yourself to tax liability. This is particularly advantageous for:
- Suppliers or service providers for companies subject to VAT
- Companies that provide the majority of their services abroad
- Start-up companies with high investments and input tax amounts, but no sales yet
3. step-by-step: registration with the FTA
Registration for VAT liability takes place in several steps:
- Check turnover threshold: Do you exceed the CHF 100,000 annual turnover or do you source many services from abroad? For start-ups, a forecast for the first financial year is required.
- UID application in the UID register if you do not yet have a company identification number.
- Online form "VAT registration" via FTA SuisseTax submit.
- Record the start date in the commercial register (tax liability begins with the commencement of business activities).
- Wait for the welcome letter and access code for the FTA portal (usually within 2-3 weeks).
4 Understanding input tax deduction - two examples
The input tax deduction is a central element of VAT. It ensures that VAT is actually only borne by the end consumer and does not lead to a multiple burden on the value-added chain.
What is deductible as input tax?
- The invoiced domestic tax (on all phases of production/distribution)
- The procurement tax declared by your company (services from companies based abroad)
- Import tax (on the import of goods)
An electronics shop in Switzerland buys goods for CHF 50,000 (net price, plus 8.1% VAT = CHF 4,050) and sells them for CHF 80,000 (net price, plus 8.1% VAT = CHF 6,480).
- Purchased input tax: CHF 4,050
- Sales tax output: CHF 6'480
- Net amount owed to the FTA: CHF 2,430
A tax consultancy firm generates CHF 200,000 turnover with VAT-liable consultancy services and CHF 100,000 with tax-exempt fiduciary services. The firm has operating costs of CHF 150,000 (net price, plus 8.1% VAT = CHF 12,150).
- Purchased input tax: CHF 12,150
- Reduction due to mixed use (1/3): - CHF 4,050
- Deductible input tax: CHF 8,100
- VAT output (8.1% of CHF 200,000): CHF 16,200
- Net amount owed to the FTA: CHF 8,100
Restrictions on input tax deduction
Input tax deduction is restricted or excluded in the following cases:
- Sales exempt from tax: For activities that are exempt from VAT and have not been opted for (e.g. healthcare, education or financial services)
- Mixed use: If goods or services are used for both business and non-business purposes
- Own consumption: When withdrawing goods or services for private purposes
- Subsidies: If subsidies are received, the input tax deduction must be reduced proportionately
5. settlement: agreed vs. received remuneration
According to the VAT Act, two methods are available for VAT accounting in Switzerland, which differ in terms of the time of taxability:
| Criterion | Agreed remuneration | Remuneration received |
|---|---|---|
| Controllability | For invoicing (gross price) | On receipt of payment (gross price) |
| Prerequisites | Standard (no special requirements) | Authorisation required from the FTA |
| Cash flow effect | Negative (VAT must be paid before payment is received) | Positive (VAT is only due after receipt of payment) |
| accounting | Based on accounts receivable and accounts payable accounting | Simple open item accounting is sufficient |
| Recommended for | Medium-sized and larger companies | Micro-enterprises with liquidity bottlenecks |
Important for the accounting period
Most taxable companies invoice quarterly, but it is also possible to invoice annually. In the case of the net tax rate method, a half-yearly statement is possible. The VAT statement must be submitted no later than 60 days after the end of the accounting period.
6. net tax rate or effective tax rate? Decision tree
To simplify tax accounting, certain companies can use the net tax rate method (SSS method).
Can I use the net tax rate method?
- Turnover limit: Is your annual turnover less than CHF 5.02 million?
YES: Continue to point 2 / NO: Use an effective method - Tax liability: Is your annual tax liability less than CHF 108,000?
YES: Continue to point 3 / NO: Use an effective method - Advantages: Do at least two of the following points apply?
- They have a high proportion of expenses with a reduced tax rate
- Your administrative workload for VAT accounting is high
- You have few staff for accounting tasks
Net tax rates by industry (selection)
| Industry | Net tax rate |
|---|---|
| Farrier | 0,1% |
| Retail Food | 0,6% |
| Consultancy firm, trust | 5,9% |
| Temporary companies, translation agencies | 6,8% |
7. common mistakes & practical tips
Delimitation of own consumption
Business owners and their families who purchase products and services from their own business become "final consumers" and are not allowed to deduct input tax on this part.
The owner of a hairdressing salon regularly uses shampoo and styling products for private use. These withdrawals must be recognised as own use in the VAT return.
- Purchase of goods (excl. VAT): CHF 100.00
- Input tax (8.1%): CHF 8.10
- Private use: 20% of the purchase of goods
- Correction input tax: CHF 1.62 (20% of CHF 8.10)
Dealing with subsidies
A company installs a photovoltaic system for CHF 50,000 (excl. VAT) and receives a subsidy of CHF 10,000.
- Input tax on investment (8.1%): CHF 4,050
- Subsidy share: 20% (10,000 / 50,000)
- Reduction of input tax: CHF 810 (20% of CHF 4,050)
- Deductible input tax: CHF 3,240
Correct VAT details on invoices
Companies subject to VAT are obliged to state their VAT number on invoices. Since 1 January 2014, only the company identification number (UID) has been valid as a VAT number.
The VAT number on invoices must look like this:
CHE-123.456.789 MWST
8 FAQ VAT Switzerland 2025
You are liable for VAT as soon as your annual turnover from taxable services reaches CHF 100,000. In the case of non-profit organisations and sports/cultural associations, the limit is CHF 250,000. The tax liability begins with the commencement of business activities if it is foreseeable that the turnover limit will be exceeded within 12 months.
To determine the VAT amount from a gross price (including VAT), use the following formula:
VAT amount = gross price × tax rate ÷ (100% + tax rate)
Example for the standard rate in Switzerland (8.1%):
CHF 108.10 (gross price) × 8.1% ÷ 108.1% = CHF 8.10
The net price is therefore CHF 100.00 (CHF 108.10 - CHF 8.10).
The VAT statement must be submitted within 60 days of the end of the accounting period:
- Quarterly settlement: 1st quarter to 31 May, 2nd quarter to 31 August, 3rd quarter to 30 November, 4th quarter to 28 February
- Half-yearly settlement (for SSS): 1st half-year until 31 August, 2nd half-year until 28 February
The tax payment must be made by the same date. Late payment is subject to interest of 4% per year.
Advantages:
- Less administrative effort (no detailed recording of input tax)
- Semi-annual instead of quarterly billing possible
- No input tax reduction necessary for subsidies or own consumption
Disadvantages:
- No input tax deduction on investments
- Flat-rate tax rate can be less favourable than the effective method
- Minimum application period of 1 year
New regulations from 1 January 2025
Annual billing
Until now, VAT could be settled quarterly, half-yearly or monthly. From 1 January 2025, companies with an annual turnover of up to CHF 5,005,000 will be able to apply for settle the VAT annually. This represents an administrative simplification compared to quarterly or semi-annual billing. The billing process can thus be organised more efficiently.
In order to benefit from the annual statement, previous and future VAT statements must be submitted on time and paid in full.
The application for annual billing can be submitted from January 2025. In order for annual billing to be permitted for the year 2025, the Application by 28 February 2025 at the latest be submitted. Newly taxable persons have 60 days after receiving their VAT number to apply for the annual statement via ePortal.
The annual statement does not change anything with regard to the declaration. Correction statements, annual reconciliations and deadline extensions can also be submitted with the annual statement. The annual statement must be submitted and paid by the end of February of the following year.
The annual statement is linked to the obligation to pay in instalments. The instalments are set by the FTA. The instalments are available in the ePortal from April each year.
Three instalments must be paid for the effective and lump-sum tax rate method and one instalment for the net tax rate method. The due dates for the instalments for the effective and flat-rate tax methods are 30 May, 30 August and 30 November. The due date for the net tax rate method is 30 August. In the event of late payment, interest on arrears is due on both the instalments and the annual statement.
The amount of the instalments is determined on the basis of the tax claim for the last tax period, whereby the minimum instalment amount is CHF 500 for the effective and flat-rate tax method and CHF 1,000 for the net tax rate method. The taxpayer has the option of adjusting the instalment amount upwards or downwards in the ePortal up to ten days before the due date.
The annual settlement can be cancelled for the following reasons terminated become:
- The taxable person cancels the annual statement via ePortal by the end of February after the start of the tax period at the latest;
- The FTA cancels the annual statement on the next tax period if the taxable person exceeds the turnover limit for three consecutive tax periods;
- The FTA cancels the annual statement on the next but one tax period if the taxable person does not submit the annual statement on time or does not pay it on time and in full or reduces the instalments too much. The instalments are reduced too much if they amount to less than 50 % of the total tax claim in the case of the effective and lump-sum tax rate method and less than 35 % in the case of the net tax rate method.
Net tax rate method
The most important changes- You can choose more than two net tax rates. The 10% rule remains applicable, i.e. a new net tax rate must be applied if the turnover share of the respective activity is more than 10% of the total taxable turnover.
- When switching from the effective accounting method to the net tax rate method, you must make corrections: You must refund to the FTA the input tax previously deducted on the current value of the goods and services at the time of the change, including the portions corrected as contribution tax.
- When switching from the net tax rate method to the effective accounting method, you must make corrections: You can claim the tax charged on the current value of the goods and services at the time of the change.
- Individual balance and lump-sum tax rates were reviewed and redefined by the FTA.
- Special procedures for export deliveries (Form 1050), crediting of notional input tax (Form 1055) and margin taxation (Form 1056) no longer apply.
- Activities that require an additional net tax rate can be applied for and declared directly in the VAT return. The review and authorisation by the FTA takes place subsequently.
You will find all changes as of 1 January 2025 under the following link:
Your previously authorised net tax rates are automatically adjusted and displayed in your statements. You do not have to do anything.
If your company performs services for which an additional net tax rate must be authorised by the FTA, apply for and declare this directly in your VAT statement. You should also ensure that the various activities and services are recorded separately in the accounts, broken down according to the respective net tax rate.
Special: Elimination of mixed sectors and 50% ruleIndustries in which several activities are usually carried out, which would have to be invoiced at different SSS rates if considered individually, were previously able to invoice the listed ancillary activities at the authorised net tax rate, provided that the turnover from ancillary activities did not exceed 50% of the total taxable turnover.
For each activity that accounts for more than 10% of total taxable turnover, the respective net tax rate must now be applied.
The sports business is a typical mixed sector. In addition to trading in sports equipment and clothing (SSS 2.1 %), sports equipment is also rented out (SSS 3.0 %) and ski and snowboard servicing is carried out (SSS 5.3 %).
Previously, all turnover could be invoiced at 2.1%, provided that the turnover from ancillary activities did not exceed 50% of the total taxable turnover.
The net tax rate for a relevant supply is now applied if the share of these supplies amounts to more than 10% of the total taxable turnover. More than two net tax rates are possible.
New tax exemption for travel agencies
The net tax rate for "travel agency: pure retailer" is no longer applicable. The services are now exempt from VAT and must be declared in item 230 of the VAT statement. The option (voluntary taxation) is not possible with the net tax rate method.
If you do not make any other taxable supplies, check the cancellation from the VAT register.
Questions & answers on the mail order regulation
If a (domestic or foreign) mail order company generates a turnover of at least CHF 100,000 per year from small consignments that it transports or dispatches from abroad to Switzerland¹, its deliveries² are deemed to be domestic deliveries. He or she subsequently becomes liable for VAT in Switzerland and must be entered in the VAT register. The tax liability arises when the turnover limit of CHF 100,000 is reached (see ). The turnover threshold is calculated from the fees paid by the buyer to the mail order company.
From the time of entry in the VAT register due to the mail order regulation, not only the small consignments of the mail order company are considered domestic deliveries, but also all other consignments for which the import tax amount is more than five francs. As a result, all domestic shipments of a taxable mail order company are subject to domestic tax³.
Even under the mail order regulation, no import tax is levied on small consignments.
¹ The term "Switzerland" refers to the territory of Switzerland, the Principality of Liechtenstein and the German municipality of Büsingen. If the term Switzerland is used below, this is done for reasons of better readability; this refers to Switzerland in the sense of value added tax.
² In addition to dispatch deliveries, transport deliveries are also relevant, but not collection deliveries. This means that deliveries trigger the tax liability if the supplier himself or herself or a third party on his or her behalf undertakes the transport to the buyer or to a location in Switzerland specified by the buyer.
³ In addition to the aforementioned supplies, all other taxable domestic supplies are also subject to domestic tax.
Subsidies
Further information on value added tax in Switzerland, the MWSTG and the application of tax can be found on the Website of the Federal Tax Administration.
