Partial revision of the VAT Law in Switzerland – Lower VAT registration threshold for e-service providers is proposed

The Swiss Federal Council has published its commentary to the partial revision of the VAT Law. If the draft legislation is approved by the Swiss parliament, the changes will come into effect on 1.1.2016. Among other changes we set out below those which are most relevant for ebiz & e-commerce.

Change of VAT registration threshold for e-service providers

According to the proposal businesses, which provide electronic services to private individuals (B2C) in Switzerland, are to be liable for tax in Switzerland, if their worldwide (i.e. Swiss and non-Swiss) turnover exceeds the threshold of CHF 100,000. By way of example, if you sell e-services to US customers in excess of CHF 100,000 and you have only one Swiss private customer who pays CHF 100 for your services, you will be required to register Swiss VAT.

This is a significant change, as currently the VAT registration threshold of CHF 100,000 is calculated for Swiss turnover only.

Changes for e-commerce

In on-line trading, up to now small deliveries with a tax amount of less than CHF 5 (e.g. books up to CHF 200) have been exempt from import VAT. In future these sales are to be taxable in Switzerland, if the non-established supplier with such deliveries generates turnover of more than CHF 100,000.

Change for electronic newspapers

The draft legislation also proposes to extend the application of the reduced VAT rate of 2.5% to electronic newspapers and magazines (without advertising character). It should be noted that e-books would continue to be taxed at the standard rate of 8%.

What does it mean for you?

You should keep monitoring the legislative changes, so that you are able to act on time to address all matters which the above changes may trigger for you (i.e. VAT registration application, pricing review, system changes etc.).

About Andras Salanki

Manager PwC Switzerland email: andras.salanki@ch.pwc.com Office: +41587924536

Andras Salanki is an international VAT advisor with 7 years of relevant professional experience. He spent one year on secondment in California, US, where he advised US multinationals on global VAT projects and also gained experience with IT and Internet companies based in the Silicon Valley.