Overview of VAT obligations
Since 2018, Switzerland’s VAT regime has applied not only to domestic companies but also to foreign businesses whose annual taxable turnover from Swiss customers exceeds CHF 100,000. Once this threshold is reached, registration with the Swiss Federal Tax Administration (FTA) becomes mandatory - even if the company has no physical presence in Switzerland.
Foreign companies engaged in e-commerce, digital platforms, consultancy, construction, installation, or maintenance services may fall within the scope of Swiss VAT. The determining factor is the place of supply: if the goods or services are deemed to be delivered or performed in Switzerland, VAT obligations arise.
Registration and VAT rates
Foreign entities must register as Swiss VAT taxpayers and issue invoices that comply with Swiss requirements. The applicable VAT rates are:
Registered companies can reclaim input VAT incurred on business expenses related to their taxable activities in Switzerland, reducing their overall tax burden.
How Switzerland differs from the EU VAT system
While similar in intent to the EU VAT regime, Swiss VAT law has distinct rules, particularly in defining supplies. Activities such as construction, repairs, or installation work are categorised as supplies of goods rather than services, which affects the place of taxation. For example, a company installing machinery in Switzerland is considered to be supplying goods locally and therefore must charge Swiss VAT.
Compliance and risk management
Failure to register or remit VAT can lead to substantial penalties, backdated assessments, and interest charges. Companies should regularly review their Swiss sales volume and ensure early registration once the threshold is met.
Accurate record-keeping, timely submission of VAT returns, and maintaining up-to-date documentation are essential for demonstrating compliance. Engaging a local VAT representative or fiscal agent in Switzerland can further streamline the process, particularly for companies without a local presence.
Looking ahead
As digitalisation and cross-border commerce continue to grow, Swiss VAT obligations for foreign companies are becoming increasingly significant. Proactive compliance not only avoids administrative and financial risks but also reinforces a company’s credibility and reputation in the Swiss market.
For businesses expanding into Switzerland, early planning and professional guidance are key to ensuring smooth, compliant operations within one of Europe’s most stable and business-friendly environments.
Understanding Swiss VAT rules can be complex, particularly when operations span multiple jurisdictions. Partnering with experienced fiduciary and tax professionals can help businesses navigate cross-border obligations effectively.
