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Marking 25 years of the Swiss VAT system

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Constant Dimitriou and Katharina Blattner of Deloitte Switzerland explain how 25 years later, the Swiss VAT system continues to evolve.

Switzerland introduced its VAT system 25 years ago in 1995. However, since adoption, the system has undergone extensive renewals throughout the years.

Existing businesses are shifting towards electronic services and an increasing number of businesses are entering the digital market. This, combined with the fact that foreign businesses have the obligation to register for Swiss VAT from the first service provided to a non-VAT registered person in Switzerland (business-to-consumer, B2C), explains how there has been a rapid increase of the number of electronic service providers that are registered for VAT purposes in Switzerland.

Assessing the changes and clarifications

As a result of this development, novel challenges have arisen from a Swiss VAT perspective. A few examples of the technical questions that the Swiss Federal Tax Administration (FTA) has tackled over the past months include the following examples.

Qualification of the supply

For example, the sale of physical books will be qualified as a supply of goods from a VAT perspective. However, what happens when books become e-books? 

In 2018, the FTA confirmed that the sale of e-books will be considered as e-services. The qualification may, however, be more difficult in practice such as online learning and distance courses. The question whether these qualify as VAT exempt educational services or taxable e-services depends on how the programme is delivered, the level of human interaction, the technology used, and whether exercises are corrected by the teacher, among other considerations. 

The FTA published a draft in mid-2019 to introduce a detailed definition of e-services, which aims to clarify the practice, and establish legal certainty on this aspect. The definition is based on three cumulative conditions for services to be qualified as electronic:

  • The service must be provided through the internet or another electronic network;

  • The provision of the service must be automated and there must be minimal human intervention of the supplier; and

  • The service could not be provided without information technologies.

Place of supply, VAT registration and attraction principle

As opposed to the supplies of goods, the supplies of services follow a different type of supplies rules. E-services are taxable as per the general rule, i.e. at the place of the beneficiary (Article 8, paragraph 1 of the VAT Law), which triggers a VAT registration as from the first B2C supply. This provided that the supplier has a worldwide annual turnover exceeding CHF 100,000 ($106,500). Once the VAT is registered, the provider has to charge Swiss VAT on all e-services including on business-to-business (B2B).

VAT rate

The nature of the supply also defines the VAT rate applicable. Provisions were thus introduced on January 1 2018 in the Swiss VAT Ordinance regarding the applicability of the reduced VAT rate to e-books without advertising purpose (subject to conditions).

Looking forward

Businesses entering in the digital market in Switzerland should be aware of the various VAT questions surrounding the provision of e-services and take the appropriate actions.

Constant Dimitriou


Katharina Blattner


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