VAT'S IMPORTANT - NEWSLETTER 2024 - 02
NEWSLETTER 2024 - 02
Partial revision of the Swiss VAT Law as of January 1, 2025
THE REVISION
The Swiss parliament approved the partial revision of the Value Added Tax Law (VATL) in June 2023, meaning that it will come into force on January 1, 2025. The main demands were as follows
Online marketplaces are to be regarded as service providers and therefore subject to VAT.
Foreign tour operators are to be exempt from tax liability if they organize trips to Switzerland.
The purchase tax obligation should apply to the transfer of emission rights, certificates and attestations for emission reductions, guarantees of origin for electricity and similar rights.
In the following, we would like to discuss the two most important changes in the area of digitization that we believe should be highlighted from the series of adjustments:
Online marketplaces
Virtual and streamed events
ONLINE MARKETPLACES
What exactly is it about?
Since 2019, e-commerce companies that deliver goods to Switzerland have been subject to VAT if they generate a turnover of at least CHF 100,000 with small consignments (VAT amount of less than CHF 5). However, the Swiss Federal Tax Authority (SFTA) and the Parliament were forced to realize that the effect of this measure is limited. This is of course also due to the fact that many smaller companies that are active in the e-commerce business do not reach the relevant turnover limit.
This taxation of online marketplaces already exists in the EU and the UK. Now it is also being introduced in Switzerland. From January 1, 2025 online marketplaces will have to declare and pay tax on all deliveries of goods that are processed via their platform and supplied in Switzerland.
How does the SFTA plan to enforce this?
In the future, for example, the SFTA will be able to impose an import ban on deliveries by the company in question and, as a final measure, order the destruction of the goods if the online marketplace or companies have wrongly failed to register or fail to meet their billing and payment obligations. In addition, the SFTA is authorized to publish the names of the companies against which such measures are applied.
In addition, an information obligation will be introduced for all online marketplaces. The SFTA can also request them to provide relevant information who is offering supplies via the marketplace to an extent that could trigger VAT liability.
STREAMING SERVICES
What exactly is it about?
It should be noted that from January 1, 2025, streaming services in the fields of culture, the arts, sport, education, science and entertainment will now be deemed to be provided at the place of the recipient. This means that providers of streaming services will have to register in Switzerland. In this respect, the Swiss VATL follows the example of the EU countries and the UK, which will also determine the place of supply for streamed and virtually provided events according to the consumer from January 1, 2025.
What does this mean for me as a provider of such streaming services?
The changes are aimed at achieving taxation at the place of consumption. Accordingly, we strongly recommend that companies that organize virtual events with live elements consider the potential impact of these changes. Among other things, they should check whether there are any local rules in the consumer's country that apply to their streaming services - such as an exemption for educational services. For events taking place outside the EU, these new regulations may conflict with the regulations of the country in which the event actually takes place and possibly lead to double taxation. In addition, it must be determined in advance where the consumers are domiciled in order to charge the correct VAT rate, if necessary.
WHAT DOES THIS MEAN FOR ME AS AN ENTREPRENEUR?
This is why it is so important to start the evaluation and to verify the corresponding implications as early as possible. Registrations take time, short-term decisions are usually not well thought through and might lead to subsequent errors. We are happy to support you in your decision-making process.
With best regards
Your terraVAT Team
Sabrina Frey Dr. Florian Hanslik
Senior Consultant Founding Partner
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