Value added tax

The state would like to benefit from the general consumption of its citizens. VAT was introduced due to these considerations.  It is also referred to as a general consumption tax.  VAT is now one of the most important sources of revenue for the federal government.

If every citizen would be held accountable to keep track of his personal consumption and to pay the VAT based on their consumption, there would undoubtedly be substantial practical difficulties - and it would simply not be feasible.  The tax is consequently levied at the source - this can be the manufacturer, the craftsman, the service provider, etc., who in turn revolve these back to the consumer.

As an entrepreneur, you are confronted with two types of VAT.

First, as a consumer (self) of services provided for which VAT is applicable and second, as a person liable to pay.

The tax liability, i.e. the obligation to pay the VAT for the services, is applicable from an annual turnover of CHF 100,000.00. Anyone who generates less than CHF 100,000.00 turnover can however voluntarily register with the ESTV (Eidgenössischen Steuerverwaltung = Federal Tax Administration).

The tax liability begins as soon as the business activity begins.

Unless the law provides for exceptions, the taxable object is generally regarded as the service provided by the taxable persons.

The tax liability ends either when there is no more entrepreneurial activity or in the event of liquidation.

There is a distinction between three different VAT percentage rates.  These different levels of taxation are based on the assumption that the taxation of certain socially or economically motivated benefits should only be taxed in a limited manner.  Other services in areas such as culture, education or also health are completely exempt of taxation. A special rate applies for accommodation services, including breakfast.  In addition to other exceptions, the reduced rate also applies for food and medicine.  For all other taxable goods, which neither underlie the reduced not the special rate, the standard rate of 7.7% is applicable.

  • Standard rate 7.7% (since 01.01.2018)
  • Reduced rate: 2.5% (since 01.01.2011)
  • Special rate: 3.7% (since 01.01.2018)

The VAT is levied on the turnover. However, as the name VAT suggests, in each case solely the added value will be taxed. In this context, the pre-tax deduction must also be mentioned. This is to ensure that taxes already levied are deducted and that in each phase, only the real added value is taxed.