25 years of Swiss VAT: The partnership with the Principality of Liechtenstein
Tim Reck and Matthias Höhn of Deloitte outline obvious differences and commonalities between the VAT laws of Switzerland and its neighbour Liechtenstein.
Following the introduction of VAT in Switzerland 25 years ago, the Principality of Liechtenstein widely adopted the technical articles from Swiss VAT law into its own VAT legislation. In addition, a bilateral agreement details the cooperation between the VAT authorities of the two countries.
In the following article, the concurrences and discrepancies between the VAT law of Switzerland and Liechtenstein are explored.
Liechtenstein has adopted Articles 5 to 14 of the Swiss VAT law. Accordingly, the requirements for a mandatory VAT registration and the option to a voluntarily VAT registration are, in principle, the same. Furthermore, the principles of the place of supply rules for the supply of goods and services are identical.
Liechtenstein domiciled entities register for VAT with tax authorities in the Principality of Liechtenstein whereas Swiss domiciled entities register for VAT with the Swiss Federal Tax Administration (SFTA). Foreign domiciled entities with supplies that lead to a VAT registration in the Swiss customs territory need to register with the SFTA. Based on this principle, a Swiss VAT registered entity may declare Liechtenstein turnover via its Swiss VAT returns.
While Switzerland maintains a publically available electronic register of entities with an UID (business identification number), in which it can be verified whether an entity is VAT registered with the SFTA, such a register is not in place in Liechtenstein. Hence, VAT numbers of Liechtenstein domiciled entities are not publically available online.
Contrary to Swiss VAT law, a Liechtenstein domiciled entity that only achieves turnover abroad is exempt from VAT liability.
Entities that are only VAT liable due to the acquisition of services need to register with the Liechtenstein VAT authorities and file an annual acquisition tax return on an official form provided by the authorities. In Switzerland, the declaration of acquisition tax is declared with a letter to the SFTA.
Cross-border VAT grouping between Swiss and Liechtenstein domiciled entities is not possible. Moreover, within the Swiss customs territory, the single entity principle applies. This means that branches in Switzerland are seen as part of the headquarters in Liechtenstein and vice versa.
While the Liechtenstein authorities have their own procedures regarding VAT audits and legal procedures, the Swiss Supreme Court is in charge for final decisions on the interpretation of the technical articles.
Overall, there is wide accordance, especially in the day-to-day business between Swiss and Liechtenstein VAT law. However, the fact that Liechtenstein is a sovereign state with its own law and institutions needs to be kept in mind, also for VAT purposes.