VAT Revision – Part 1: Extension of Subjective Taxability
The VAT legislation in Switzerland is being totally revised. The first part of this revision, which has simplified the VAT system, has been in place since 2010. Now the second part is coming into force on 1 January 2018. To some extent, it is going to bring about some major changes, which also start-ups may profit from. According to the Federal Council, 30,000 new companies, especially foreign ones, are expected to be registered as VAT payers. STARTUPS.CH explains which changes are most vital for start-ups.
Goals of the Revision
One of the main goals of the VAT revision is to get rid of any discrimination towards residents. In the current legal situation, Swiss companies are disadvantaged to their foreign competitors as far as VAT is concerned. This is most visible when taxability is assessed on a subjective basis and in mail-order business.
Subjective Taxability
At present companies in Switzerland are VAT payers when their annual turnover exceeds 100,000 francs. It is an advantage for foreign companies that, despite generating even more turnover than their Swiss competitors, do not reach Switzerland’s 100,000 franc limit. This should change with the new article 20 clause 2 letter a of the VAT Act, under which subjective taxability will now be based on global turnover. With the VAT revision in place, companies operating in Switzerland and earning more than 100,000 francs worldwide become Swiss VAT payers.
This is welcome to many Swiss start-ups, for it is often just in their early stages when companies are exposed to high cost pressure. The fact that foreign companies can operate at lower costs is then frustrating. Owing to the VAT revision, from 1 January 2018 on this discrimination will be over.
To foreign start-ups, however, this may mean a new additional cost. Companies that are not sure if this new VAT regulation makes them taxable or not, or what exactly kind of effects this may have for them, should immediately seek professional advice. STARTUPS.CH recommends Findea as a competent and reliable partner for this purpose.
