Upcoming revision of the Swiss VAT Law – introduction to the changes coming into effect in the health sector
We continue our series of blogs (n°1, n°2, n°3, n°4, n°5) on the upcoming partial revision of the Swiss VAT Law (VATL), which will come into force on the 1st of January 2025. In this blog, changes related to the health sector are presented.
From 1 January 2025, there will be changes to the governing legislation, along with new additions to VAT exempt without credit supplies and VAT rates within the Swiss VAT law, that impact the health sector.
According to current practice, under Art. 21 of the Swiss VATL, the VAT exemption without credit in the health sector applies to supplies in relation to medical care and medical treatments provided in various forms of facilities. These include, but are not limited to, hospitals and centres for medical treatment and diagnosis (specifically in reference to hospital treatment and medical treatment in hospitals in the field of human medicine).
1. Changes in the provision of care facilities (art. 21, para. 2 cipher 2 rVATL)
Under the upcoming amendments, the criteria for qualifying medical care and treatments as VAT exempt without credit supplies is set to be extended to allow medical treatment taking place in other facilities, such as outpatient clinics and day clinics, to qualify as VAT exempt without credit supplies
2. New rule relating to the provision of care coordination services as a part of medical treatment
As per the current legislation, supplies rendered in connection with care coordination of a medical treatment are not falling under the exemption criteria under Swiss VATL.
This is set to change with the upcoming revision. As per 1 January 2025, the revised Swiss VAT law will broaden the provision and will in turn extend the scope of the VAT exemption without credit to additionally include care coordination services; this change is to be found under the rVATL, Art. 21, para 2 cipher 3.
3. Change in the provision of supplies provided by social welfare and social security institutions
Currently, art. 21 para. 2 cipher 8 of the Swiss VAT law specifies that services provided by social welfare and social security institutions, public home care organizations (Spitex) and retirement, residential and nursing homes are VAT exempt without credit.
From 1 January 2025 the provision will no longer solely govern over services provided by public bodies but will be broadened to also allow for private entities providing such services to classify under the scope of the VAT exemption.
Change of the VAT rate of menstrual hygiene products
Finally, as from 1 January 2025, menstrual hygiene products i.e., tampons, sanitary towels, panty liners, but also menstrual sponges, menstrual cups and other similar devices, will no longer be subject to the VAT standard rate of 8.1% but will be subject to the reduced VAT rate of 2.6% (as per the new provision in art. 25 para. 2 letter a cipher 10 Swiss rVATL.).
The reduced rate does not apply to, for example, incontinence products and adult disposables (diapers).
The changes linked to VAT exempt without credit supplies entail a scope extension. Consequently, additional supplies will fall under the definition of “VAT exempt without credit”. Whilst these amendments and new provisions of Swiss VATL provide clarity, it is worth noting for companies to consider whether to opt for VAT or to consider their exemption.
Next steps
It might be beneficial in some cases to consider opting to tax on VAT exempt supplies, in order to allow the recovery of input VAT on certain costs incurred in the framework of the activity.
If you would like to discuss this topic, please reach out to our key contacts below.
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