• Mathias Bopp, Partner |
  • Margarita Sataite, Expert |

During the assembled special session on 10 May 2022, the National Council has debated the partial revision of the Swiss Value Added Tax Act. The voting took place after the Committee for Economic Affairs and Taxes of the National Council had consulted and agreed on the revision of the Value Added Tax Act presented by the Federal Council while several amendments were proposed on 11 April 2022. Considering this partial revision of the Swiss Value Added Tax, this blog presents an overview of the key discussion points and regulations which have been approved by the National Council on 10 May 2022.  

However, the legislative process is not yet completed. Next, the Council of States will review the revision of the proposed VAT law. This process continues back and forth with the aim of reaching an agreement in both chambers of parliament. If the National Council and the Council of States can agree on a joint text, a public referendum may take place in the final stage. Therefore, the revision of the VAT law might enter into force on 1 January 2024 at the earliest.

Electronic platforms

A core topic of the discussions and previous consultations was the taxation of electronic platforms in Switzerland. The implementation of the regulation in the new Article 20a VAT Act, which is supported by the majority of the National Council would mean that any electronic platform becomes subject to Swiss VAT. This regulation would stop the disadvantage of Swiss providers, ensuring fair competition with their foreign competitors. As per the new regulation, online platforms themselves are to be treated as suppliers. Consequently, suppliers are deemed to make a (VAT-exempted) sale to the platform and the platform is deemed to sell the products to the customers. This means that platforms, rather than the sellers, collect VAT from customers. Any person who renders services that consist of connecting sellers and buyers on the platform shall be treated as an electronic platform.  

It is important to consider that this regulation will not be applicable to the supply of electronic services through the online platform. It is questionable whether the arguments that electronic service suppliers generally sell digital content on their own and that the sharing and gig economy suppliers are already based in Switzerland, provide sufficient rationale for this exclusion.

Considering the fact that this regulation will apply to the Swiss business vendors selling their goods on electronic platforms as well, the new regulation will impose significant administrative and procedural burden on the sellers and increase the FTA’s discretion during audits on and litigation against the sellers. 

Nevertheless, non-taxable sales by private individuals and non-taxable businesses will now be subject to VAT if carried using an electronic platform.

This in turn may create a loophole as the electronic platforms could likewise apply the deemed input tax deduction. 

Trading in emission and similar rights

As advised by the majority of the Committee of the National Council, the Federal Council`s proposal to implement the reverse charge mechanism for trading in the emission and similar rights in Article 1 para. 1 no. 2. lit. b VAT Act has been approved. By introducing this regulation, the legal basis is being created to implement the Federal Supreme Court ruling from 2019 according to which emissions trading must be made subject to VAT. According to this, the transfer of emission rights, certificates and attestations for emission reductions, guarantees of origin for electricity and similar rights shall become subject to acquisition tax in Switzerland regardless of whether the supply is made by a domestic or a foreign company. This would not only prevent the fraud with emission and similar rights, but even lead to advantages for the industry concerned allowing to deduct the input tax.

The alternative proposal advised to treat the renumeration for supply of the emission and similar rights as non-consideration which would mean that the VAT law is not applicable in these cases because a such supply does not create an economic value, but rather at best an ecological value. However, this did not reach a majority of votes in the National Council.

Import of products of minor value

A further minority proposal of the Committee of the National Council was related to the shifting of the place of supply by the foreign online platforms to Switzerland. As per this proposal, the foreign electronic platforms would already be liable to tax in Switzerland for their first cross-border delivery (e.g. supplies of small consignments), whereas other distance sale companies would only be liable to tax on small consignments from an annual turnover of CHF 100,000. However, this proposal did not receive sufficient support in the National Council as this regulation combined with the marketplace rules would not treat online platforms equally and distance sellers who are selling their goods directly to the end customers. 

Travel agencies and organizers of events

According to the current regulation of Art. 8 para 2 lt. b VAT Act the place of supply of services provided by travel agencies and event organisers is where the service provider has its permanent establishment or the place from which it operates. If the place of supply is in Switzerland, the VAT exemption pursuant to the Art. 23 para 2 no. 10 VAT Act is applicable to the extent that the service provider makes use of supplies of goods and services by third parties that are provided abroad. 

On the one hand, the Federal Council proposed to exclude organizers of events from these regulations and on the other hand to include the VAT exemption for services provided by the travel agencies in their own name that are carried out abroad or would be exempt from VAT under the regulation of Art. 23 VAT Act if they were not provided by a travel agency. 

The Committee of the National Council concluded that the status quo is the better solution compared to the proposed one by the Federal Council. Therefore, the regulation of Art. 8 para 2 lt. b VAT Act will remain unmodified.

The minority`s proposal that the current VAT regulation should be only applicable for the travel agent's services and for the sale of travel and supplies of tourism among creating a special VAT exemption rule for these cases has not experienced sufficient support.

Fiscal representation and annual VAT reconciliation

The regulation related to the fiscal representation of foreign companies in Switzerland in the version as proposed by the Committee of the National Council was supported by the majority. As per new regulation of Art. 67 para 1bis and 1ter VAT Act the tax representative must be deleted from the Swiss UID register no later than 30 days after the notification of the withdrawal of the mandate as tax representative to the FTA. The taxpayer must appoint a new tax representative within 30 days of the notification and notify the FTA. If the taxpayer fails to appoint a new representative, the FTA may initiate tax safeguarding measures. However, the representation is not required for companies with an annual turnover from taxable supplies in Switzerland below CHF 250,000.

In addition to ensuring the above-mentioned procedural obligations, the taxable person without a domicile or place of business in Switzerland must confirm annually within the time limit of 180 days after the end of the relevant business year or at the time of deregistration the completeness and adequacy of the submitted statements of account for the tax period of the previous year.

Import VAT deferral

The Federal Council has proposed the revision of Art. 63 para 1 VAT Act implementing the import VAT deferral regime which means that the tax due on the import of goods may be declared within the periodic VAT return filed with the Swiss Federal Tax Authorities instead of paying it. As per the National Council, this regulation would be applicable for the importer who is VAT registered in Switzerland only.

Other regulations approved by the National Council

Among other regulations, supplies by hospitals, centres for medical treatment and diagnostic centres, patient clinics and day clinics would be VAT-exempt as per proposal of the Committee of the National Council. In addition, services of coordinated care including purely administrative services would also be VAT-exempt. 

In future, the reduced tax rate of 2.5 % is to apply to menstrual hygiene products as these are goods of daily use and several countries such as Germany, Austria, Ireland, Canada, already apply either the reduced VAT rate or VAT exemption to these products.

The tax exemption for the sale of second-hand goods proposed by the minority of the Committee of the National Council has been declined by the majority and will not be implemented. 

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