VAT liability – Who has to charge value-added tax (VAT)?
In principle, anyone carrying out an independent commercial or professional activity is subject to VAT on annual sales of CHF 100,000 or more. This applies to independent private individuals (e.g. sole proprietorships or partnerships) and corporations (e.g. Sàrl and SA). The tax rate is 7.7%, with exceptions for lower rates.
There are various exceptions to VAT liability. On the one hand, VAT is only payable on sales above a certain threshold or on a certain amount of tax. On the other hand, various activities are excluded from the scope of VAT.
Sales limit of CHF 100,000
Anyone with annual sales of less than CHF 100,000 is in principle exempt from VAT. Consequently, no VAT return is required. However, it is possible to register voluntarily for VAT at any time.
If no VAT declaration has been made, the company cannot mention VAT on invoices issued, nor can it settle them. Nor is it possible to reclaim input tax (input tax is the VAT paid automatically by the company on purchases, services or other investments).
If you register voluntarily for VAT, you will be treated in the same way as a company with sales in excess of CHF 100,000 for VAT invoicing and accounting purposes. When registering, the VAT-registered person can also choose (up to certain sales limits) whether to settle VAT using the effective method or the net tax liability rate method. The most advantageous accounting method for the company must be examined on a case-by-case basis.
To summarize
A VAT return must be filed as soon as annual sales exceed the CHF 100,000 limit. If sales are lower, it may be worthwhile registering voluntarily, particularly if the company makes substantial investments or incurs regular expenses. Ideally, this question should be clarified with an experienced advisor.
Exceptions and exemptions
Apart from these sales and tax limits, there is a long list of exceptions and tax exemptions. Examples include services provided by doctors and physiotherapists, educational services, institutional childcare or admission fees to museums and zoos. Whether a newly-established business qualifies for an exception or exemption must be checked on a case-by-case basis.
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