Switzerland will introduce VAT on platform operators starting in 2025. Based on the partial revision of the Swiss VAT law that was approved in 2023, marketplace operators will be subject to a deemed supplier rule for all sales of goods they facilitate unless certain conditions are fulfilled (see the article in this issue). This article highlights the main features of the new Swiss platform taxation, which is based on the EU deemed supplier rules that have applied since 2021, as well as the major differences between the Swiss and EU systems.
Nonresident businesses active in Switzerland are required to register for VAT with their first supply located and taxable in Switzerland unless the reverse charge is applicable. Providers of electronic and telecommunication services made to non-VAT-registered customers (B2C transactions), in particular, are obliged to register. The standard VAT rate is currently 8.1%, along with a reduced rate of 2.6%. Once registered, a business will have to charge Swiss VAT on sales to Swiss customers and file periodic VAT returns.
Under Swiss customs law, import VAT below CHF 5 is not levied. In other words, shipments with a value under CHF 62 (CHF 200 for reduced rated goods, i.e., small consignments or low value consignments) are not subject to Swiss import VAT upon importation. This will not change in 2025.
To prevent the nontaxation of e-commerce sales and distortions of competition with Swiss retailers, Switzerland introduced an e-commerce rule in 2019 that “obliged” online merchants to register for Swiss VAT if they sell more than CHF 100,000 per annum in low value consignments to Swiss customers. This measure proved to be inefficient essentially due to its "voluntary" nature; there was no means to monitor merchants’ sales and force them to register for VAT once the threshold was reached and in reality, while many merchants registered, very few were the Asian merchants that were initially the target of the rule. Platform taxation is designed as the solution to this problem.
The strategy under the Swiss VAT reform is for the platform rather than the merchant to be responsible for VAT obligations, and this is accomplished by introducing a deemed supplier rule. Switzerland basically cut and pasted the EU rules but added a Swiss touch to make it completely different (e.g., the difference between the tax treatment of a supply of goods and a supply of services).
The following are the salient points about the new platform taxation rules:
The Swiss VAT administration is expected to release updated guidance on platform taxation around the end of October or the beginning of November. Platforms operating in Switzerland will have sufficient time to register for VAT by the 1 January 2025 deadline. However, affected platforms should examine their internal systems and processes to ensure they will be compliant in 2025. Accurate importation information and designating the platform as the importer of record are key.
Nic Weber
BDO in Switzerland
Background and Import VAT and E-commerce Rules of 2019
Nonresident businesses active in Switzerland are required to register for VAT with their first supply located and taxable in Switzerland unless the reverse charge is applicable. Providers of electronic and telecommunication services made to non-VAT-registered customers (B2C transactions), in particular, are obliged to register. The standard VAT rate is currently 8.1%, along with a reduced rate of 2.6%. Once registered, a business will have to charge Swiss VAT on sales to Swiss customers and file periodic VAT returns.Under Swiss customs law, import VAT below CHF 5 is not levied. In other words, shipments with a value under CHF 62 (CHF 200 for reduced rated goods, i.e., small consignments or low value consignments) are not subject to Swiss import VAT upon importation. This will not change in 2025.
To prevent the nontaxation of e-commerce sales and distortions of competition with Swiss retailers, Switzerland introduced an e-commerce rule in 2019 that “obliged” online merchants to register for Swiss VAT if they sell more than CHF 100,000 per annum in low value consignments to Swiss customers. This measure proved to be inefficient essentially due to its "voluntary" nature; there was no means to monitor merchants’ sales and force them to register for VAT once the threshold was reached and in reality, while many merchants registered, very few were the Asian merchants that were initially the target of the rule. Platform taxation is designed as the solution to this problem.
2025: Platform Taxation
The strategy under the Swiss VAT reform is for the platform rather than the merchant to be responsible for VAT obligations, and this is accomplished by introducing a deemed supplier rule. Switzerland basically cut and pasted the EU rules but added a Swiss touch to make it completely different (e.g., the difference between the tax treatment of a supply of goods and a supply of services).The following are the salient points about the new platform taxation rules:
- A digital platform is defined as an electronic interface that facilitates interactions electronically between two or more users with the aim of providing a supply of goods and/or services.
- Any person that facilitates a supply of goods via a digital platform by connecting sellers with buyers to conclude a contract on the platform will be deemed to be the supplier of the goods for VAT purposes. The end result is that the platform will be deemed to have purchased the goods from the original seller (with that sale being zero rated) and resold them to the buyer.
- The new platform taxation will be applicable only to platforms selling goods and not to those facilitating the supply of services (in particular, for the transport of passengers or the provision of accommodation). The rental or leasing of goods, which is technically a supply of goods under Swiss VAT law, is also excluded from the scope of the rules based on the current draft of the administrative guidelines released by the Swiss tax authorities in July. Platforms facilitating services will only have to provide information on the transaction to the VAT authorities.
- A platform will be able to avoid deemed supplier status if it fulfils one or more of the following conditions:
- It is not directly or indirectly involved in the ordering process;
- It does not generate turnover directly related to the business;
- It only carries out payment processing in connection with the supply;
- It only provides space for advertisements;
- It only provides advertising services; and
- It only redirects or forwards purchasers to other platforms.
- Interestingly, there are no special rules regarding the VAT liability of such platforms. Platforms can register voluntarily or be obliged to register for VAT under the general VAT rules. As an e-commerce company (the same rule that applies to merchants since platforms are now deemed suppliers), a platform will be required to register if it facilitates more than CHF 100,000 per annum of small consignment sales under the 2019 e-commerce rule. A platform can register voluntarily using the subordination declaration (Unterstellungserklärung, declaration d'engagment, dichiarazione d'adesione). This option enables the platform to be VAT registered as of 1 January 2025, act as the importer of record, pay, recover or defer import VAT on high value consignments and invoice local VAT on sales to its Swiss customers (on low and high value consignments). It offers an optimal experience for the customer, who can make a purchase on the platform with local VAT charged (as would be the case if the supply was from a local retailer) and avoid additional costs relating to importation and customs clearance.
- The platform is responsible for collecting VAT on the value of the goods as indicated to the customer on the platform. The deemed sale from the platform to the customer is subject to Swiss VAT on both low and high value consignments.
- The sale from the merchant to the platform is zero-rated (even if it is a local sale in Switzerland).
- The platform must be able to issue an invoice for all supplies it facilitates in the Swiss territory. The invoice is basically issued in the name of, and for the account of, the merchant, with the platform adding Swiss VAT on domestic transactions. A statement such as "VAT at 8.1% (or 2.6%) transferred according to article 20a of the Swiss VAT law by [name and VAT number of the platform]" would be useful. If the merchant also issues an invoice, it must not indicate any Swiss VAT.
- In principle, a VAT-registered platform will be the importer of record where goods are imported, import VAT being levied only on high value consignments. An import VAT deferral (reverse charge mechanism) scheme, called the “transfer procedure” (Verlagerungsverfahren, procédure de report, procedura di riporto del pagamento dell’imposta sull’importazione) can mitigate the cash flow impact. Without this procedure, import VAT is recoverable as input tax under the general rules.
- The tax authorities will be empowered to impose administrative sanctions on platforms that make supplies in the Swiss territory but either fail to register as a taxable person or fail to comply or only partially comply with their reporting or payment obligations. Administrative measures include an import ban on all shipments originating from the platform, the destruction of shipments at the border without compensation and publication of a blacklist of noncompliant platforms.
- Merchants that are registered for VAT in Switzerland due to the e-commerce rule and making sales via platforms can, in principle, deregister as from 31 December 2024. However, merchants will be jointly liable with the platform for VAT debts if the platform does not comply with the VAT rules. A hold harmless clause in the agreement with the platform that limits the merchant’s liability should be considered.
Comments
Import VAT will continue to be levied on high value consignments only. However, under the new platform taxation rules, sales by VAT-registered platforms facilitating the sale of goods will be subject to local VAT by the platform on both low and high value consignments.The Swiss VAT administration is expected to release updated guidance on platform taxation around the end of October or the beginning of November. Platforms operating in Switzerland will have sufficient time to register for VAT by the 1 January 2025 deadline. However, affected platforms should examine their internal systems and processes to ensure they will be compliant in 2025. Accurate importation information and designating the platform as the importer of record are key.
Nic Weber
BDO in Switzerland