As announced in our blog published on 26 September 2022, public voters have decided to increase VAT rates to finance “Current-age and survivors” insurance. On 7 February 2023 the Swiss Federal Tax Administration (SFTA) published VAT Info 19 which includes the respective guidelines and transition rules.
As from 1 January 2024, the following new VAT rates will be applicable in Switzerland (including Municipality of Liechtenstein) :
- New standard rate: 8.1% (+0.4)
- New reduced rate: 2.6% (+0.1)
- New accommodation rate: 3.8% (+0.1)
Current and new VAT rates: When to apply them?
The publication of the SFTA confirms that the fundamental principle to determine the tax point regarding the applicability of the current or new VAT rates is the date or period of the supply and not when an invoice is issued, or a payment is made (art. 115 para. 1 Swiss VATL). Thus, supplies rendered (entirely) by 31 December 2023 are subject to the current rates while the new rates will apply to supplies rendered as from 1 January 2024.
When invoices cover supplies rendered during both 2023 and 2024, the date or period and the amount relating to each period must be mentioned separately and split between the applicable rates. If this allocation is not made on an invoice, all supplies will be subject to the new VAT rates.
Based on the above principle, the VAT info includes guidelines on how to treat partial payments and invoices, prepayments and invoices for such prepayments, continuous supplies (e.g. subscriptions, maintenance contracts) partly rendered after the VAT rate increase, diminution of the consideration (e.g. rebates), volume discounts, returns of goods, acquisition tax, import VAT, specificities for the hotel and restaurant sector, VAT deduction, etc.
Partial payments / partial invoices / advanced payments
Partial payments for supplies rendered before 31 December 2023 are subject to the current VAT rates and can be invoiced under the current rates. Similarly, partial payments for supplies rendered as of 1 January 2024 must be invoiced with the new VAT rates (note that the SFTA has announced that the Q3 2023 VAT return form will already cater for the new rates).
Periodic respectively continuous supplies
Periodic supplies across both the current and new VAT rate periods must be allocated and split according to the pro rata temporis principle. This would be the case, for example, for a 3-years maintenance contract covering 2023, 2024 and 2025. The portion relating to 2024 and 2025 must be invoiced with the new rates.
It is important to note that ancillary supplies follow the VAT treatment of the main supply.
Reduction of consideration, returns & cancellation of supplies
Rebates, volume and/or cash discounts related to supplies taxed at the current VAT rate are also to be granted with the current VAT rate and vice versa. For example, in the case of credit notes for volume discounts issued in 2024 in relation to supplies before 1 January 2024, the current VAT rates will apply (i.e. the date or period of the underlying supplies are decisive).
The above outlined principle also applies to returns and cancellation of supplies. The VAT rate applicable at the time of the supply determines the VAT rate applicable to the return or cancellation of the supply.
Input VAT deduction
As a general principle a taxable person can deduct the Swiss VAT invoiced in the frame of its entrepreneurial activity. Thus, so-called VAT differences invoiced as a correction of the initially wrongly applied VAT rate (by the supplier) should generally be deductible.
Implications for your organisation – next steps
In view of the above, the following adaptations may notably be required:
- Review inbound, such as acquisition tax, as well outbound transactions (e.g. leasing and rental contracts, commission arrangements) in your organisation that could be subject to the VAT rate change.
- In the case of lump sum tax returns, validate the new applicable lump sum rates with the SFTA.
- Determine additional tax codes to manage both the supplies subject to the current VAT rates and those subject to the new ones.
- Review guidelines to compliance teams to adapt the VAT compliance process to align with the new VAT return including the new VAT rates (available as from Q3 2023 or 2nd semester 2023 for taxpayers applying the flat rate method).
- Review invoice templates, contracts, etc. to reflect the new rates as from 1 January 2024 and attention must be paid to prepayments, continuous supplies, etc.
With these guidelines, businesses should generally be in a position to assess the impacts of the upcoming new VAT rates on their organisation and take the necessary actions.
Deloitte will be happy to discuss and guide you through the VAT impacts for your organization in order to ensure a smooth transition.
We will also have the VAT rate change as a topic on our upcoming breakfast event on 16 March 2023. Registrations are already open.
If you would like to discuss this topic, please do reach out to your key Deloitte contacts or the authors below.