VAT rates in Switzerland will increase as of 1 January 2024. There might already be the need to issue invoices and account for VAT with the new VAT rates. The relevant aspects that need to be taken into account will be discussed in this article.
What VAT rates will apply in Switzerland as of 1 January 2024?
The VAT rates change as follows:
| As of 1.1.2021 | New rates | |
| Standard rate | 7.7% | 8.1% |
| Reduced rate | 2.5% | 2.6% |
| Special rate for accommodation | 3.7% | 3.8% |
General information
The applicable VAT rate is determined by the time the service is rendered (not the date of invoicing or payment). In the case of periodic services (e.g. subscriptions), the period during which the service is rendered is also decisive. Services rendered until 31 December 2023 are subject to the current VAT rates. Services rendered as of 1 January 2024 will be subject to the new VAT rates.
Even if the time of the service is decisive for whether the old or the new VAT rate applies, the tax liability arises with the issuing of the invoice or the date that appears on the invoice.
Which VAT rate applies to services that extend beyond the VAT rate increase?
In the case of cross-period services, the new VAT rates might already have to be applied. If services that are subject to both the current and the new VAT rates are listed on the same invoice, there are two possibilities according to the practice of the Federal Tax Administration (FTA) how these services can be listed.
I. If the services can be separated by date or period provided, the respective share of the amount attributable to it should be shown separately and the VAT rate applicable to the respective period can be applied. For example, services provided in December 2023 and shown on the invoice as such can be invoiced with the current VAT rate of 7.7% and services provided in January 2024 can be invoiced separately with the new VAT rate of 8.1%.
II. If the services cannot be shown separately on the invoice, the entire services must be invoiced at the new VAT rates (VAT rates from 2024).
If a service or maintenance contract extends beyond the date of the VAT rate increase, the remuneration must in principle be allocated on a pro-rated basis to the current and the new VAT rate.
Practical Issues
In the VAT returns of the 3rd quarter of 2023 (with effective settlement method) and the month of July 2023 (with monthly returns), the turnover can be declared for the first time at both the previous and the new VAT rates.
Charges that are to be declared in an earlier VAT return period but relate to services provided after 1 January 2024, unfortunately have to be declared with the current tax rates for the time being. They can be corrected at the earliest with the return for the 3rd quarter of 2023 or the month of July 2023. A correction must be made at the latest at the time of the finalisation of the 2023 tax period with the annual VAT reconciliation.
Therefore, it is highly recommended for companies to update their ERP systems and tax code logic with the new VAT rates as soon as possible, to be in a position to comply with their respective VAT obligations.
