VAT registration in Switzerland: from when, and by when

VAT is the only tax where you have to notice yourself that you owe it. Nobody writes to you. No letter arrives when you cross the threshold, and no reminder when you’ve missed it. The liability arises from your turnover – and the responsibility for noticing is yours.

So the right question isn’t “do I have to?”, it’s “since when?”.

The threshold: CHF 100,000

Anyone running a business in Switzerland with turnover of at least CHF 100,000 a year from taxable supplies becomes liable for VAT (Art. 10 VAT Act). Three details are regularly misunderstood:

Turnover counts, not profit. What’s left after your costs plays no part. A trade business with a high materials share reaches the threshold far sooner than a consultancy earning the same.

Worldwide turnover counts. Supplies to customers abroad are included, provided they would be taxable domestically. Anyone selling part of their work across the border and therefore adding up only the Swiss share is calculating themselves below the threshold.

For charitable institutions and non-profit sports and cultural associations the limit is higher, at CHF 250,000. For sole proprietorships and ordinary businesses the CHF 100,000 figure applies.

When liability starts

Two cases part company here, and the difference matters at the start.

Case 1 – foreseeable from the outset. If it is already clear when you take up the activity that you will reach the threshold within the first twelve months, liability begins with the start of that activity. So you are liable from day one, not from the day the hundred-thousandth franc is booked.

Case 2 – grown into it. If you were exempt so far and cross the threshold during a financial year, liability begins after the end of that financial year.

The first case affects more founders than you’d think: anyone starting a trading business or an operation with a material input usually knows from the outset where turnover will land.

The 30-day deadline

Once liability begins, you have 30 days to register with the Federal Tax Administration (Art. 66 para. 1 VAT Act). The deadline runs from the start of liability, not from the moment you notice.

Registration is done online with the ESTV. You then receive your VAT number, which is built on the UID – the same number that already identifies your business.

That is also why you should know your turnover continuously, rather than in the spring of the following year. Anyone who crosses the threshold in September and discovers it in March at the annual close missed the deadline long ago and owes the tax anyway on all turnover since liability began – except they never charged it to their customers.

The second threshold at CHF 100,000

There is a second rule carrying the same figure, and the two are regularly confused: a sole proprietorship must be entered in the commercial register once it has made at least CHF 100,000 of turnover in the previous financial year (Art. 931 para. 1 CO). Members of the liberal professions are exempt unless they run a business organised along commercial lines.

Same number, but different rules. VAT liability can start on your first day of trading, and registration has to follow within 30 days. The commercial register duty, by contrast, is tied to the financial year that has closed, and the law sets no deadline for it: if you do not comply, the commercial register office calls on you to do so and sets you a deadline (Art. 938 CO). Anyone reaching the threshold therefore generally has two things to deal with, not one. Below the limit, registering is voluntary (Art. 931 para. 3 CO) – and it often makes a more established impression on new customers. The guide to the order of steps for starting a sole proprietorship shows where registration fits into the rest of the set-up.

Registering voluntarily: when it pays off

You can also register before you have to. The law calls this waiving the exemption from tax liability (Art. 11 VAT Act). Two points:

• The waiver is possible at the earliest from the beginning of the current tax period.
• You have to maintain it for at least one tax period (Art. 11 para. 2 VAT Act). So it isn’t a decision you reverse after two months.

In favour is mainly the input tax deduction. Anyone investing substantially at the start – vehicle, machinery, fit-out, equipment – can reclaim the VAT paid on it. On CHF 60,000 of investment at the standard rate that’s several thousand francs which would otherwise simply be cost. A second argument: if your customers are mostly businesses, they deduct the tax anyway – so it doesn’t weigh on your prices at all.

Against are the administrative effort and the price effect. You file periodically, you track input tax properly, and with private customers you become more expensive by the amount of the rate, without anyone being able to deduct anything. For a service to private individuals with little material input, voluntary registration is rarely a good deal.

What changes once you’re registered

Three things immediately:

Your invoices need the UID. Once you are liable, your VAT number belongs on every invoice, together with the rate and the tax amount. If your invoicing carries that automatically, it’s a setting rather than a source of errors.

You choose an accounting method. The effective method or the net tax rate method – the choice determines how much work filing costs you and how much tax you end up paying. Which method suits which business is covered in the article on VAT accounting.

You work with the applicable rates: 8.1 % standard rate, 2.6 % reduced rate, 3.8 % special rate for accommodation.

The three most common mistakes

1. Waiting for a letter. None is coming. The liability arises from your turnover.
2. Charging VAT before being registered. Anyone showing VAT without being liable owes it anyway.
3. Counting only Swiss turnover. The relevant turnover is the worldwide figure.

All three have the same cause: your own turnover isn’t known on an ongoing basis. Bookkeeping that is maintained during the year makes the threshold visible before it is crossed – rather than once the deadline has expired.

Conclusion

The threshold is CHF 100,000 of worldwide turnover from taxable supplies, and the registration deadline is 30 days from the start of liability. Whether that start is your first day of trading or the end of the year in which you crossed the threshold depends on whether it was foreseeable from the outset.

Anyone who knows the figure plans for it – in their hourly rate as much as in the provision that also has to leave room for the AHV. And anyone who doesn’t want to assemble the filing by hand lets it grow out of the receipts already captured: Effizo’s VAT feature prepares the return from your ongoing entries.