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Switzerland: Swiss VAT consequences for distance selling businesses as of 2019

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Benno Suter

Tomáš Rodák

Based on a partial revision of the current Swiss VAT Law (VAT-L), foreign domiciled companies selling into Switzerland will be treated the same as companies domiciled in Switzerland.

Current position

If a foreign domiciled distance selling company supplies goods into Switzerland, generally Swiss import VAT is due. The person (i.e. freight forwarder) responsible for customs clearance charges the Swiss import VAT due to the recipient of the goods.

Due to low materiality and processing costs, the Swiss Federal Customs Administration (SFCA) does not insist on the collection of import VAT for the shipments with the import VAT amount of CHF 5 ($5) or less (low value goods, or LVG).

New regulation as of January 1 2019

If a distance selling company generates the annual turnover from LVG-shipments of at least CHF 100,000, its supplies are considered as domestic supplies and the company consequently becomes taxable in Switzerland. The tax liability arises the moment the given turnover threshold is reached.

The import of the goods is carried out by the distance selling company in its own name from the beginning of the tax liability and can therefore deduct the import VAT as input VAT accordingly (the distance selling company acts as importer of record).

Distance selling companies can already voluntarily apply for the simplified import procedure allowing a foreign domiciled company to act as importer of record before the annual LVG-turnover threshold of CHF 100,000.

Each person meeting the conditions for the obligatory VAT registration must register independently with the SFCA.

The foreign domiciled company/person has to appoint a Swiss fiscal tax representative as well as apply for a bank guarantee provided for an unlimited period with a Swiss domiciled bank or make a cash deposit on the SFCA's bank account.

If a (domestic or foreign) company is already Swiss VAT registered due to other supplies inland and such a company also provides LVG distance selling from abroad into Switzerland, those LVG supplies are still considered as turnover generated abroad so long as the annual threshold of CHF 100,000 from such supplies is not reached.

Action required

  • To decide whether the foreign domiciled distance selling company is obliged to be Swiss VAT registered as of January 1 2019 based on the LVG deliveries to Switzerland, start monitoring the respective annual CHF 100,000 LVG turnover as from January 1 2018;

  • To consider the option for the voluntary Swiss VAT registration prior January 1 2019 based on the "simplified import procedure" application;

  • Most services rendered to Swiss recipients will become subject to 8% VAT once a company is Swiss VAT registered; and

  • The distance selling company, once Swiss VAT registered, should amend the internal pricing definitions, system set-up allowing for the correct issuance of invoices and related declaration/payment of Swiss VAT (and customs duty, where applicable).

Companies that may be affected by this change in Swiss VAT legislation are well advised to consult with their respective VAT advisers to ensure compliance with the new legislation.

Benno Suter (bsuter@deloitte.ch) and Tomáš Rodák (trodak@deloitte.ch)

Deloitte

Tel: +41 58 279 6366 and +41 58 279 6364

Website: www.deloitte.ch

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