2025 Partial Revision of the Value Added Tax Act (MWSTG)

On 1st January 2025, significant changes to the Value Added Tax (VAT) laws were implemented in Switzerland. The partial revision of the VAT Act (MWSTG) represents a significant step toward modernizing the country’s tax framework in a rapidly digitalizing world. The changes primarily address the growing prominence of e-commerce platforms but also includes broader updates aimed at simplifying processes, increasing transparency, and closing gaps in compliance. This article explores the key changes to Swiss VAT, their implications for businesses, and practical steps for navigating the new rules effectively.

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Highlights

  • E-commerce platforms are now responsible for collecting VAT on sales in Switzerland
  • SMEs can settle VAT annually from 2025, which reduces the administrative burden
  • Extended tax exemptions include cultural, medical and social services
  • Fraud prevention is strengthened by securities and VAT on emission rights
  • The SSS method for SMEs is becoming more complicated, which makes it sensible to switch to the effective method

Content

  • 2025 Partial Revision of the Value Added Tax Act (MWSTG)
  • Highlights & content
  • What’s new in Swiss VAT? A snapshot of the key changes
  • Focus on e-commerce platforms
  • Broader updates to the VAT act: what else changes for SMEs in Switzerland?
  • Overwhelmed by VAT? Nexova makes things simple
  • FAQ
  • Trusted by over 150 companies

What’s new in Swiss VAT? A snapshot of the key changes

The revised Value Added Tax Act (MWSTG) introduces specific measures to address the evolving dynamics of commerce and correct previous inefficiencies. Key changes include:

  1. E-commerce platforms as VAT collectors: The responsibility for VAT collection in both domestic and cross-border transactions shifts from sellers to platforms.
  2. Simplified VAT settlement for SMEs: The new option for annual VAT reporting and settlement can ease the burden on small businesses.
  3. Expanded VAT exemptions: Additional goods and services are exempt from VAT, reducing costs for consumers.
  4. Fraud prevention measures: Ne mechanisms to reduce VAT fraud, such as collateral requirements and acquisition tax on emission rights transfers.
  5. Revisions to the balance tax rate method: Updates to the balance tax rate method (SSS) make it more complicated and raise questions about its viability.

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Focus on e-commerce platforms

The primary focus of the partial VAT revision is on shifting VAT obligations from sellers to e-commerce platforms.

VAT for mail-order companies: the old rules

Before 1st January 2019, Switzerland completely waived import sales tax (VAT) on small shipments with a tax value of CHF 5 or less. This gave foreign online retailers dealing with small consignments a competitive edge over Swiss companies.

In an attempt to correct this imbalance, Switzerland introduced a partial VAT revision in 2019, whereby mail-order companies delivering goods to Switzerland have been required to pay VAT if their turnover from small shipments (those with an import tax of less than CHF 5) exceeds CHF 100,000. However, this measure has proven to have limited impact, as the vast majority of smaller mail-order businesses fall below the turnover threshold. 

What are the new VAT rules for e-commerce platforms?

Realizing these limitations, the federal tax authorities put forward the partial revision of the Value Added Tax Act (MWSTG), passed by Parliament in June 2023, into effect on 1st January 2025.

The primary change is that online mail-order platforms will now be regarded as service providers for all transactions they facilitate in Switzerland, regardless of whether they are based domestically or abroad. They must therefore declare and tax all the deliveries of goods that are processed on their platform. In other words, the burden of VAT collection shifts from the individual sellers to the e-commerce platform itself.

The new platform taxation rules apply exclusively to e-commerce platforms facilitating the sale of goods. Platforms that facilitate the rental of goods or the provision of services are not directly subject to these VAT changes. However, they are now obligated to report information to the Federal Tax Administration (FTA) about the annual domestic sales of individuals or entities offering services through their platforms that could trigger VAT liability. This requirement primarily targets sectors like transportation (e.g., taxi or courier services) and accommodation rentals, where the platforms themselves are not regarded as service providers for tax purposes.

VAT revisions in practice: How will Swiss VAT work in e-commerce?

From a practical perspective, these changes mean that all small consignments from abroad are now subjected to VAT when they are sold on mail-order platforms that meet VAT registration thresholds, even if the seller is below the CHF 100,000 threshold. It also means that the responsibility of VAT collection lies with platforms, and no longer the individual sellers.

Here’s how it works in practice:

When an item is sold through an electronic platform, two fictitious transactions are created for VAT purposes: one between the original seller and the platform, and another between the platform and the buyer. If the platform is VAT-registered, the first transaction is either treated as exempt from tax or considered to have occurred abroad, meaning foreign sellers who exclusively engage in such transactions are not subject to any Swiss VAT obligations.

Effectively, from a VAT perspective, platforms are treated as if they purchase items from the seller and then resell them to the buyer, even though the seller remains the actual vendor under civil law. The platform is responsible for charging, collecting, and remitting VAT on the second transaction to the Federal Tax Administration (FTA).

This framework allows tax authorities to treat platforms as intermediaries while still ensuring proper VAT collection on transactions that involve many small or foreign sellers, which might otherwise escape taxation.

Which e-commerce platforms are subject to VAT?

An electronic platform is required to pay VAT in Switzerland if it has annual sales of at least CHF 100,000 from goods and services subject to VAT, either as a Swiss-based platform or by exporting goods and services to Switzerland. The platform’s services are considered to take place in Switzerland if the goods are already located in the country or if a foreign platform generates at least CHF 100,000 annually from small consignments imported into Switzerland.

Platform operators that only perform supporting roles and are not classified as service providers for tax purposes are exempt from platform taxation. This includes operators who do not participate in the ordering process or generate revenue directly linked to the transactions. Additionally, providers solely responsible for payment processing, offering advertising space or services, or redirecting buyers to other platforms are also excluded from these tax obligations.

What are the implications for e-commerce platforms and sellers?

For platforms

E-commerce platforms now shoulder significant compliance responsibilities for VAT collection, including:

  • Implementing systems to calculate and charge VAT accurately,
  • Correct VAT invoicing to buyers in Switzerland,
  • Proper processing of VAT and maintaining detailed records of taxable transactions for tax filing with the FTA,
  • Ensuring foreign sellers comply with Swiss VAT rules.

It’s vital for electronic platforms to fully understand and adhere to their obligations, as the FTA can take punitory action on platforms or companies who fail to register for VAT or do not meet their VAT billing and payment requirements. These may include an import ban on the non-compliant deliveries, or in serious cases, the complete destruction of the imported goods.

For sellers

In general, the VAT revisions simplify matters for sellers, as they no longer need to navigate the complexities of Swiss VAT rules themselves. Instead, platforms take on the responsibility for VAT collection and remittance, streamlining operations for sellers.

However, small shipments that were previously exempt from VAT because the seller’s turnover fell below the CHF 100,000 threshold will now be subject to VAT. This change could lead to higher end prices for consumers or force suppliers to lower their own prices to remain competitive, ultimately erasing the competitive advantage these sellers previously enjoyed. Sellers may also face higher costs as platforms pass on compliance-related expenses.

Sellers must take the following action:

  • Confirm whether they must still collect VAT on their sales or if the electronic platform will collect the VAT from the domestic buyer,
  • Check that the e-commerce platform is indeed subject to the new VAT regime,
  • Understand that they are secondarily liable for the VAT owed on their platform sales. This means they should ensure the platform they use follows the new VAT rules, especially by being registered for VAT in Switzerland.

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Broader updates to the VAT act: what else changes for SMEs in Switzerland?

Aside from the primary focus of the new VAT revisions on e-commerce platforms, the tax authorities have used this opportunity to also introduce various other broader changes that have an impact on Swiss companies, particularly SMEs. These updates are generally aimed at improving the efficiency and fairness of Switzerland’s VAT system.

Simplified VAT settlement for SMEs

As of January 1, 2025, companies with an annual turnover of up to CHF 5,005,000 can apply to report their VAT annually instead of quarterly or semi-annually. This offers administrative relief compared to previous reporting frequencies. However, the obligation to make installment payments set by the Federal Tax Administration (FTA) remains. The installment amounts are based on the tax liability of the previous tax period and can be adjusted in the ePortal.

The option for annual reporting is only available to companies that have submitted their previous and current VAT returns on time and paid them in full. The application for annual reporting can be submitted starting in January 2025 via the ePortal. To use the annual reporting option for 2025, the application must be submitted no later than February 28, 2025. Newly taxable companies have 60 days from the allocation of their VAT number to apply for annual reporting.

The annual VAT return must be submitted and paid by the end of February of the following year. Late payments on installments or the annual VAT return are subject to interest on arrears. Companies can also submit correction returns and apply for deadline extensions as usual.

Expanded VAT exemptions for goods and services

The revised act broadens the scope of VAT-exempt goods and services in Switzerland. These exemptions include essential items and services that promote accessibility and affordability, such as certain cultural activities and medical care services.

In particular, the following goods and services are now exempt from VAT:

  • Travel services resold by domestic and foreign travel agencies, including related services (foreign travel agencies are not liable for VAT in Switzerland when organizing trips to Switzerland).
  • Active participation in cultural events.
  • Coordinated care services related to medical treatments.
  • The provision of infrastructure for attending physicians in outpatient and day clinics.
  • Care and household services provided by private Spitex organizations.
  • The provision of personnel by non-profit organizations.
  • The management and offering of investment groups by investment foundations under the Federal Act on Occupational Retirement, Survivors’ and Disability Pensions (BVG).

Additionally, the reduced rate of 2.6% now applies to menstrual hygiene products.

Enhanced measures to prevent VAT fraud and strengthen accountability

To address the issue of serial bankruptcies, the FTA is now authorized to require collateral from individuals who are members of the management bodies of legal entities. This applies if they have previously served on the managing body of at least two other companies that declared bankruptcy within a short time frame.

Additionally, the transfer of emission rights, such as certificates for emission reductions, guarantees of origin for electricity, and similar rights, is a known area of vulnerability for VAT fraud. To counter this, these transfers are now subject to acquisition tax, even when the purchaser is a domestic company.

Updates to the balance tax rate method

The net tax rate method (SSS method) was originally designed to be a simplified accounting method for SMEs. However, it has become less favorable and more complex under the revised VAT rules.

New restrictions, such as mandatory corrections for input tax deductions when switching accounting methods and stricter requirements for activities exceeding 10% of total turnover, increase the administrative burden. Together with its existing limitations, businesses should carefully assess whether continuing with the SSS method is worthwhile or if switching to the effective method might be a better option. Notably, foreign taxpayers can no longer use this method.

Subsidies become even more complex

The revised VAT rules retain the reduction in input tax deductions for companies receiving subsidies. However, a new provision clarifies that funds explicitly labeled as subsidies by a community are automatically treated as such, leading to an input tax reduction.

This change introduces further complexity, especially in distinguishing subsidies from payments for services rendered, such as those related to service contracts. Companies receiving funding from communities must continue to carefully analyze the tax implications of these payments to ensure compliance.

In essence, subsidies remain a highly complex area from a VAT perspective, and therefore require extensive expertise and careful analysis to avoid legal issues. To minimize risks and optimize tax benefits, businesses should seek professional support when assessing and implementing subsidy schemes.

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Overwhelmed by VAT? Nexova makes things simple

Dealing with the complexities of Swiss VAT compliance can be challenging for businesses, especially when it comes to keeping pace with the latest updates. While the new revisions help simplify VAT obligations for SMEs and e-commerce vendors, they also come with their challenges. Businesses should seek expert guidance to stay on top of the latest regulations and understand their obligations.

That’s where Nexova comes in. As a trusted digital fiduciary with deep expertise in Swiss tax laws and reporting standards, we cut through the complexity of VAT to provide clear and practical solutions for your business. Our tax consulting and accounting services are designed to be simple and convenient, encompassing everything from VAT registration and reporting to strategic tax planning and optimization.

With Nexova as your partner, VAT compliance becomes one less thing to worry about. Contact us today to discover more about how we can help you manage VAT with confidence.

FAQ

Answers at a click

What is the main focus of the new VAT revisions?

The new VAT revisions primarily aim to shift VAT collection responsibilities from individual sellers to e-commerce platforms for transactions facilitated through their platforms. This change simplifies compliance, ensures better transparency, and enhances VAT collection efficiency, especially in cross-border e-commerce transactions.

Are there any other updates impacting SMEs in Switzerland?

Yes, the revised VAT rules introduce several updates benefiting SMEs, including the option for annual VAT settlement for businesses with a turnover of CHF 5 million or less. Additionally, expanded VAT exemptions for certain goods and services and enhanced measures to prevent VAT fraud are among the broader changes.

Are all e-commerce platforms subject to the new VAT rules?

No, the new VAT rules apply only to platforms facilitating the sale of goods. Platforms that enable services, such as transportation or accommodation rentals, are not directly taxed but must report sales information to the Federal Tax Administration if VAT liability could be triggered.

 What are the implications of the revised VAT rules for consumers?

Consumers may experience higher prices on goods previously exempt from VAT, such as small consignments from abroad. However, the changes aim to level the playing field between foreign and domestic sellers, potentially encouraging fairer competition.

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