VAT obligations for foreign companies in Switzerland:  Key rules and compliance

Legal framework and application 

The Swiss VAT Act imposes registration and collection duties on businesses exceeding an annual turnover of CHF 100,000 within Switzerland. This threshold applies to all foreign companies providing digital services, online platforms, or physical products to Swiss customers. Registration with the Swiss Federal Tax Administration is mandatory once this threshold is exceeded, regardless of whether the company maintains a physical presence in Switzerland. The place of supply determines the VAT liability: services or goods deemed delivered in Switzerland trigger VAT obligations. 

Unlike EU VAT law, the Swiss system classifies the rental of goods, repairs, installation work, and construction activities as supplies of goods, not services. This affects the place of taxation and may create VAT obligations in Switzerland. Examples include construction, painting, electrical installation, maintenance, and repairs of machinery. If goods are transported, the place of supply is where transport begins; if installed in Switzerland, it is in Switzerland.

Invoices must indicate the applicable Swiss VAT rates, currently 8.1% for standard goods and services, 3.8% for accommodation services, and 2.6% for reduced-rate items such as food, books, and medicines. VAT registered companies can also deduct input VAT incurred on business expenses in Switzerland, providing partial relief from the tax burden. 

Significance and compliance considerations 

For businesses, compliance is crucial to avoid penalties, back taxes, and interest charges. Failure to register or remit VAT can result in significant administrative and financial consequences. Early assessment of turnover and timely registration with the Swiss Federal Tax Administration are therefore essential. 

The VAT rules enhance transparency in cross-border transactions and ensure foreign companies contribute fairly to the Swiss tax system. By providing clear guidelines, Switzerland facilitates predictable tax treatment while maintaining competitiveness for international suppliers. 

Outlook

With growing e-commerce and digital trade, these VAT rules are increasingly relevant. Companies should monitor sales, keep accurate records, and follow official guidance to ensure smooth compliance.

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Cédric-Olivier Jenoure is an attorney-at-law and Swiss certified tax expert at Bratschi AG, Basel. He advises corporate groups, entrepreneurs, and private clients on national and international tax matters, including restructurings, succession planning, and cross-border VAT issues.

Melanie Fischer is a junior Associate at Bratschi AG, Basel, supporting clients in civil and tax law matters with international perspective and practical experience.