VAT rate changes in Switzerland are quite common, mainly to finance “governmental projects”. The last VAT rate change took place in 2018. Based on our past experiences, we would generally expect the Swiss Federal Tax Administration (“SFTA”) to set transition rules covering both the tax point and resulting invoicing, as well as reporting rules. The key aspects mentioned hereinafter (subject to final publication and confirmation) will have to be considered from VATable persons in Switzerland.

What has been publicly voted for?

Yesterday, public voters in Switzerland decided to finance the “Old-age and survivors' insurance” through a VAT rate increase as per (earliest) 1 January 2024. Based on the public vote the VAT rates will increase as follows:

• New standard rate: 8.1% (+0.4)
• New reduced rate: 2.6% (+0.1)
• New accommodation rate: 3.8% (+0.1)

The reform of the withholding tax was, however, rejected. The main objective of the draft bill released by the parliament, was to exempt interest on Swiss bonds from withholding tax and to abolish the Swiss securities transfer tax on the transfer of Swiss bonds. Ultimately, the leading argument claiming that the tax bill will lead to more tax evasion convinced the electorate more than the argument of the government therefore leading to a majority in parliament who believed that the Swiss bond market could be strengthened by the new legislation. As the referendum successfully rejected the draft bill, there are no changes to either the Withholding Tax Act or to the Stamp Duty Act. Your Deloitte team is currently working on an outlook for new ideas on how to strengthen the Swiss bond market and a recommendation on what investors and issuers of bonds need to consider.

What is Ahead?

VAT rate changes in Switzerland are quite common to mainly finance “governmental projects” – the last VAT rate change took place in 2018. Based on past experiences we would generally expect the Swiss Federal Tax Administration (“SFTA”) to set transition rules covering tax point and resulting invoicing, as well as reporting rules. The key aspects mentioned hereinafter (subject to final publication and confirmation) will have to be considered from a VATable person in Switzerland.

Tax Point

According to Art. 40 Swiss VAT Law it is the standard rule that tax point arises either upon invoicing or with the collection of the consideration if made in advance of payments (reporting based on agreed consideration). Deviating from the standard rule, the practice of the SFTA for recent VAT rate changes applied the date of the supply as a tax point for determining whether the old or the new VAT rate must be considered. For the transition period, thus, neither the invoice date nor the payment date could be decisive.

In case of so-called continuous supplies, various questions around the date of the supply are triggered. Continuous supplies (e.g. subscription to newspaper) are, moreover, often payable in advance. If such supplies cross both periods (pre as well as post the introduction date of the VAT increase) the SFTA in recent VAT rate increases provided a practice that the consideration needs to be divided pro rata temporis between the old and new VAT rate period covered by the supply.

Whether reductions of consideration such as discounts, rebates and the likes applied prior to the introduction of the new VAT rate (2024), need to be adjusted with the old tax rates like in recent VAT rate changes will have to be assessed based on the transition rules to be published by the SFTA.

Invoicing

Old and new VAT rates may be included in the same invoice. However, the date respectively period of the supply must be clearly indicated.

Reporting

We would expect the SFTA to make available a VAT return form (in the e-filing portal “ESTV/AFC SuisseTax”) in relatively short timeframe from now, to reflect the new VAT rates. Especially, in order to cover and address the continuous supplies across calendar years, where the old as well as new VAT rate should possible to be indicated on the form already.

Accounting / ERP Set-Up Impact

As usual the existing VAT codes / keys needs to be terminated when no supplies subject to old VAT rates are expected anymore. Furthermore, new VAT codes must be set-up, especially since 2 out of the 3 new VAT rates did not exist before. In case of continuous supplies this might already become relevant prior to 2024.

Ultimately, we moreover note that for VATable persons applying the net tax rate or flat tax rate method (lump sum rates) a change in VAT rates arises with the duty to re-confirm the applied lump sum rates starting from the introduction of the new VAT rates.

Your Deloitte VAT team will monitor upcoming publications from the SFTA and will keep you posted - please watch out for the next VAT breakfast in November! Of course, we remain at your disposal for any questions you may have, please reach out to your trusted VAT team member which will be happy to help.

If you would like to discuss more on the above topics, please do reach out to our key contacts below.

Key contacts

Romy Mueller - Director, Indirect Tax

Romy is leading the Swiss Deloitte VAT team and is responsible for SAP Tax within Deloitte Switzerland. She has 15+ years experiences in advising Swiss and international companies in all VAT matters. Her focus is on international trade structures, M&A and post-merger integration.

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Constant Dimitriou - Director, Indirect Tax

Constant is a Director leading the Indirect Tax practice in Romandie (Geneva and Lausanne). He has 15+ years of experience in EU and Swiss VAT covering all industries with a focus on the trading and FSI sectors. He advises Swiss and foreign multinationals notably on complex supply chain projects (structuring and optimization), internal processes and controls, systems, VAT audits and VAT compliance. Constant regularly intervenes as external speaker on VAT matters and has been listed as a Swiss Indirect Tax Leader in the International Tax Review for many years.

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Danielle Koyuncu - Director, Financial Services Tax

Danielle is a Director in the financial services Swiss tax team, specialized in advising financial institutions in the banking, insurance and asset management investment area. Danielle is a Swiss Certified Tax Expert with more than 15 years of experience in corporate international taxation and Swiss VAT.

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Cindy Schnider - Consultant, Indirect Tax

Cindy is a Consultant in the Deloitte VAT team based in Zurich and has joined Deloitte in early 2021. Since joining our VAT team, Cindy has gained experience in different projects applying VAT knowledge in M&A transactions, compliance and supply chain review. Besides she is completing a Master’s degree in Law at the University of St. Gallen.

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