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VAT Revision – Part 2: Changes in Mail-Order Business and for Electronic Newspapers and Books

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.

 

New VAT Rate for Electronic Newspapers and Books

From 1 January 2018 on the VAT rate for electronic newspapers, magazines and books not classified as advertising will be reduced to 2.5%. To date they have been subject to the regular rate of 8%. To which products the old tax rate applies and to which the new one will be determined based on the time of providing the service, which is understood to be the moment when consumers can access published content.

Changes in Mail-Order Business as per 1 January 2019

Due to technical reasons, this change will be put into effect only as per 1 January 2019. As with subjective taxability (see the first article), it is also meant to help eliminate discrimination against residents.

Whenever goods are sent to Switzerland, Swiss import tax accrues. However, for economical reasons parcels with a tax amount below 5.00 francs are left untaxed. For the regular VAT rate, this is the case with parcels worth approx. 62.50 francs. If a parcel is subject to the reduced rate of 2.5%, then the parcel value may even be as high as 200.00 francs. It is a blatant discrimination against Swiss companies.

This is the reason why the VAT revision makes VAT payers out of all mail-order companies in Switzerland which reach their annual turnover threshold of 100,000 francs by sending tax-free parcels. If this is the case, their future shipments will be classified as domestic. Thus, applicable VAT will have to be levied on goods delivered to Switzerland. From the beginning of the tax year, mail-order companies will import goods for their own account. As now they are importers, in return they can deduct import tax.

 

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