Changes to Swiss Annual VAT Reporting Planned for 2025
The Swiss Federal Council has announced that a revised VAT law, passed by the Swiss parliament in June 2023, will be effective from January 1, 2025. From this date, Swiss VAT-registered companies can opt for annual VAT reporting. The revision also removes the need for foreign taxpayers to have a fiscal representative and introduces joint liability for directors on VAT debts.
Updates to VAT reporting requirements
Under the current system, VAT reporting can be quarterly, semi-annually, or monthly, with payments and refunds matching reporting frequencies. With the new law, small and medium-sized businesses can file VAT annually, lowering their reporting frequency. Businesses should, however, take into consideration that this might not be the best option if they are expecting VAT refunds.
To qualify for annual reporting, businesses must not exceed a taxable turnover of CHF 5,005,000 and should have a history of timely VAT return submissions and payments for the past three tax periods. Timeliness is defined as within 60 days post-reporting period or within an SFTA-granted extension, with similar rules for payment deadlines.
Annual VAT reporting requires taxpayers to make advance payments to the SFTA, assessed at the time of annual reporting application, usually based on the previous year's VAT. Advance payments are quarterly for the flat tax rate method and semi-annual for the net tax rates method. These payments are adjusted against the final tax after submitting the annual return, with any excess refunded. Late payments or underpayments may incur interest charges by the SFTA.
Businesses can switch to or from annual VAT reporting at the start of any tax period, provided requests are submitted within 60 days. Returning to annual reporting after a switch requires waiting three full tax periods. Exceeding the turnover threshold, underpaying advances, failing to submit an annual return, or legal issues related to VAT debts may lead to revoked annual reporting privileges.
Fiscal representation and joint liability managing directors
Currently, taxpayers based outside of Switzerland must communicate with the Swiss Federal Tax Administration (SFTA) via a fiscal representative located within Switzerland. The upcoming Swiss VAT law amendments will allow the SFTA to bypass the need for a tax representative if alternative communication methods with foreign taxpayers are established.
The changes will also see joint liability for managing directors introduced, and the SFTA will have the authority to demand security from directors in cases of previous bankruptcies, which can be used to cover unpaid VAT if company debt collection fails.
Further changes
Starting January 1, 2025, several compliance rules will come into effect. Taxable individuals considered suppliers under VAT act article 20a or those based outside Switzerland will no longer be able to use the lump-sum method. For cash transactions exceeding CHF 15,000 between registered entities, the notification procedure will become mandatory. Also, electronic proof of export for goods will be acceptable in the context of passenger traffic.
