Invoicing in Switzerland: Essential Components and Compliance

What constitutes an invoice?

An invoice is a formal request for payment issued by a seller that serves as a contractual agreement between the seller and the buyer following the delivery of goods or services. In other words, it is a formal statement of what the buyer owes for the purchase.

Invoices are used by businesses for accounts receivable tracking and tax purposes. Legally, it must contain specific information to be considered valid. This includes details of the parties involved, a description of the goods or services provided, pricing, and VAT information, among other elements.

Recognizing the difference between an invoice and other financial documents, such as receipts or purchase orders, is fundamental in ensuring proper financial record-keeping and compliance. All these documents are critical components of the accounting and procurement processes, but they serve different purposes and are used at different stages of a transaction.

Types of invoices

There are various types of invoices generated in different formats. Here’s a breakdown of the most common types of invoices used in Switzerland:

• Paper Invoices: These are traditional invoices handwritten or printed on paper and sent by post or handed directly to the customer. Despite the digital age, paper invoices remain prevalent in certain industries and with businesses that prefer tangible records.
• PDF Invoices: PDF invoices are digital replicas of paper invoices that can be created on a PC and sent to the customer via email. PDF invoices mimic the layout and content of paper invoices and are not strictly considered electronic invoices. They therefore offer the convenience of digital distribution without the need for specific e-invoicing standards.
• Electronic Invoices: These invoices are generated, sent, and received in a structured electronic format which allows for automatic and electronic processing. They usually include a QR code which allows the receiving customer to pay for the invoice instantly from their mobile phone.  This format facilitates efficient transaction processing, reduces errors, and enhances compliance with VAT requirements.
• Proforma Invoices: A proforma invoice is issued before the delivery of goods or completion of services. It outlines the seller’s commitment to deliver goods or services at a specified price. While not strictly a demand for payment, proforma invoices are useful for customs purposes in international trade and for buyers to arrange for payment. One use of proforma invoices is to send free sample shipments to a business partner in a foreign country.

Correct invoicing from a VAT perspective

Value Added Tax (VAT) is a critical component of invoicing in Switzerland. To enable the buyer of goods or services to reclaim input tax deductions, it’s essential that invoices are “VAT compliant”, meaning that they meet the formal VAT invoicing requirements in Switzerland. To ensure compliance, it is mandatory to clearly indicate the VAT amount charged, unless the goods or services are exempt. This not only ensures transparency but also facilitates accurate VAT reporting and enables buyers to reclaim the VAT paid.

We discuss the essential elements of compliant invoicing in the next section:

What are the essential elements of an invoice?

According to Art. 26 of the Federal Act on VAT, for an invoice to be legally compliant and satisfy VAT requirements in Switzerland, it must contain the following mandatory elements:

Mandatory information

• Name and address of the supplier along with their VAT number (UID and VAT) if they are subject to VAT,
• Name and address of the recipient,
• Date of the invoice,
• Date of delivery of goods or provision of services if it is different to the invoice date,
• Exact name of the goods or service,
• The price or fee of the goods or service,
• The rate of VAT applied, and the amount of VAT charged if not included in the price,
• Signature in certain cases (see more detailed explanation later).

Optional additions

• Invoice number: While not legally required as part of the statutory minimum information, adding a unique identifier for each invoice (invoice number) is common practice in Switzerland and is highly advised. Invoice numbers help with accurate record-keeping and reporting.
• Payment terms: By default, it is assumed that customers should pay their invoices upon receipt. But the inclusion of written payment terms such as the due date and any early payment discounts can help avoid payment delays.
• Bank details: To make it easier for the buyer and facilitate smooth payments, it is advisable to include bank details or other electronic payment channels (QR codes, card payment option, etc.).
• Thank you note: A personal touch can enhance customer relations.

Is a digital signature required?

Prior to 2018, the Swiss Federal Tax Authority (FTA) had set strict requirements for digital financial documents, including electronic invoices. It was mandatory for these invoices to be digitally signed with the use of expensive and complex software to ensure authenticity and enable input tax deductions.

However, this slowed progress towards the digitalization of accounting in Switzerland, and the rules were hence revised. New VAT regulations enacted on 1 January 2018 (Article 122), stipulated equal treatment of electronic invoices, paper invoices (printed and scanned), and PDF invoices. This means that currently, e-invoices in Switzerland are considered equivalent to their paper counterparts, provided they ensure the authenticity of origin and the integrity of content. In both cases (paper or electronic), a signature or electronic signature is not mandatory for a valid invoice and the right to deduct input taxes.

That said, companies must still be able to prove the authenticity and integrity of invoice records, whether stored on paper or electronically. A digital signature, while not mandatory for every business, serves as a robust tool to meet these requirements, offering an additional layer of security and trust. Without a digital signature, companies must ensure they have other reliable internal control systems to prove the authenticity of their invoices.

Ultimately, the onus is on each individual business to assess their operations and decide whether a digital signature is necessary for their invoicing processes, especially when dealing with international clients or large transactions. A common solution may be to include a digital signature requirement for large transactions above a certain threshold, and not for lower value invoices.

Record retention: how long do invoices have to be kept

Swiss law stipulates a limitation period of ten years for all claims arising from contracts (OR Art. 127). As such, businesses are required to retain receipts and invoices for at least this ten-year period. This also ensures that invoices are available for tax audit purposes in which original invoices can be requested up to ten years after they were issued. Both paper and electronic invoices must be kept in a way that ensures they are accessible and readable throughout this period.

What if you issue an incorrect invoice?

Even if you handle your invoices with all the required attention to detail, mistakes can happen. Perhaps the quoted price is missing a number, or the name or address on the invoice is incorrect. When errors occur, it’s important to address them promptly and correctly. If an incorrect invoice has been issued, the issuing party must cancel the original invoice and issue a new, corrected one. The corrected invoice should clearly indicate that it replaces the prior incorrect invoice, to avoid confusion and ensure accurate record-keeping.

If the incorrect invoice has already been paid, you need to first create a cancellation invoice to negate the original invoice before issuing a corrected invoice. If the payment received was too much or too little, the balance will need to be met by the relevant party (buyer or seller).

Fortunately, invoicing errors can be greatly reduced with thorough invoicing protocols and the use of advanced e-invoicing software. This can help reduce the time and costs associated with rectifying incorrect invoices, and more importantly projects a greater level of professionalism and reliability to customers.