Change in the Swiss VAT rules: big consequences, even for small consignments!

New Swiss VAT rules have potentially serious consequences for vendors exporting small consignments to Switzerland. Here’s a brief rundown of the changes to help prevent you or your customers from getting into trouble.

What will change?

Starting the first day of 2019, small consignments sent to Switzerland from abroad will no longer be exempt from Swiss VAT (value-added tax). Any seller that makes more than CHF 100,000 a year or the equivalent on low-value goods will have to register for VAT in Switzerland and charge Swiss VAT to customers receiving such consignments. 

In other words, there will no longer be an exemption for so-called low-value consignments. The current arrangement is that no import VAT has to be paid when a consignment enters Switzerland if the value of the goods doesn’t exceed CHF 65 (or CHF 200 for goods such as books that are subject to a reduced rate of VAT). So until now, customers haven’t had to pay any VAT on small consignments. This will all change in 2019.

Am I affected?

To find out whether you’re affected by the new rules, you should check whether your turnover from low-value consignments sent to Switzerland will be more than CHF 100,000 in 2018. That’s equivalent to around USD 100,000, EUR 89,000 or GBP 80,000. 

If your turnover was below the CHF 100K threshold in 2018 but you exceed it in 2019 or a subsequent year, you’ll have to register for VAT in Switzerland immediately you go over the limit (i.e. with effect from the following month). For example, if your sales of the relevant (low-value) goods between January 2019 and October 2019 are more than CHF 100,000, you need to register for VAT with effect from 1 November 2019. If you sell low value goods for more than CHF 100,000 between January 2020 and March 2020, you need to register for VAT with effect from 1 April 2020.

What do I have to do next?

If you exceed the CHF 100K threshold for low-value supplies, you’ll have to register with the Swiss VAT authorities with effect from 1 January 2019. 

Remember that it’s up to you to assess your Swiss VAT situation yourself and register if you meet the requirements. You’ll then need to appoint a fiscal representative in Switzerland and provide security for VAT liabilities in the form of cash or a bank guarantee. But don’t worry: none of this is complicated, and there’s help available if you need it. More about that in a moment.

What else do I need to know?

Once you’ve registered for Swiss VAT you have to charge VAT to your Swiss customers. The current rates are 7.7% for standard-rated goods and 2.5% for reduced-rated goods (such as e.g. books). You need to indicate this VAT on the invoice, collect it from the customer, declare it in a Swiss VAT return, and pay it to the Swiss Tax Administration.

What if not all of my goods are low-value goods?

If you sell low value-goods and also goods which exceed the CHF 65 (standard) or CHF 200 (reduced-rate) threshold, the following happens to the goods above the threshold:

• When the goods enter Switzerland, the Swiss Federal Customs Administration assesses import VAT and charges it to you. You pay this import VAT and reclaim it as input VAT via your VAT return. This means that while the import VAT isn’t a final cost to your business, you do need to finance it.
• Secondly, you charge Swiss VAT to your customer. In other words, you indicate it on the invoice, collect it, report it on your VAT return, and pay it over to the Swiss Federal Tax Administration.

Help!

While you yourself are responsible for making sure you comply with the new Swiss VAT rules, there’s help available if you need it. Visit our Smart VAT page for more guidance on how to assess whether you need to register and information on the easy steps to stay compliant. PwC’s Smart VAT is an easy, effective and affordable service that will enable you to continue doing business safely in Switzerland. And it will save you time and money in the process.

And of course, feel free to contact me to discuss any concerns around Swiss VAT compliance.