Switzerland agrees to partial revision of VAT Act

A new law passed in Switzerland on 16 June 2023 will revise the VAT Act. It is currently assumed that the amendments will enter into force on 1 January 2025. An optional referendum opposing the amendment to the VAT Act (with temporal effects on its entry into force) is generally possible, but unlikely.

An overview of the relevant changes follows. Taxpayers will want to become familiar with the proposed changes, consider requesting clarification if needed and initiate necessary measures in a timely manner.

• Turnover from the sale of goods through an electronic platform that enable traders to deliver goods1 to or in Switzerland will be attributed to the platform, with VAT consequences for platforms and traders. However, a series of conditions must be checked separately for each transaction.
• All electronic platforms (i.e., all electronic interfaces that enable parties to make direct contact online with the aim of providing deliveries or services) will be required to provide information regarding sellers and buyers.
• Administrative sanctions will be introduced for mail order businesses that do not comply with their VAT obligations (e.g., import ban, uncompensated destruction of goods).
• Travel agency services (including resold travel services) will be exempt from VAT without an input VAT credit (option for taxation possible; e.g., for business travel). Travel agencies will be granted a general right to recover input VAT related to the sale of foreign travel.
• The “place of supply” for streaming services in culture, arts, sports, education, science, and entertainment will be deemed to be at the recipient’s location.
• VAT exemptions in the healthcare sector will be expanded and clarified in various ways. For example, the VAT exemption’s subjective scope will apply to ambulatory and day clinics; managed care services in connection with medical treatment will be exempt from VAT; and the requirements will be eased for obtaining a VAT exemption for supplying staff to nonprofit healthcare institutions.
• A further VAT exemption will apply to investment foundations’ management (2nd pillar elderly savings) and offering of investments.
• The purchase of emission rights will be subject to the acquisition tax, even if the seller is based in Switzerland (domestic acquisition tax).
• Funds granted by public bodies will be considered to be subsidies for VAT purposes if they are designated as subsidies.
• Articles of monthly hygiene will be subject to the reduced VAT rate of 2.6%.
• Small businesses may apply to declare their turnover on an annual basis, but must nonetheless pay VAT instalments over the course of the year.
• The Swiss Federal Tax Administration may waive the appointment of a fiscal representative for foreign taxpayers upon their discretion. No immediate changes are expected. According to the Swiss Federal Tax Administration, this is foreseen for mid-term development on improved international administrative assistance.

Some changes will affect specific industries, while others will have cross-industry effects. As a first step, taxpayers will need to individually assess which adjustments will affect their VAT situation.

For additional information with respect to this Alert, please contact the following:

Ernst & Young Ltd, Zürich

• Benno Suter
• Andrea Stocker-Sohst

Ernst & Young LLP (United States), Swiss Tax Desk, New York

• Stefan Ruest

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor

For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.