TAX OBLIGATION: for the foreign companies
In the new edition of VAT Info 22 “Foreign companies”, the Federal Tax Administration deals with the main topics concerning tax, accounting, and registration obligations.
registration of companies having their domicile or their activity abroad. It is the first time since the modification of the law in force applicable since January 1, 2018 that the treatment of Swiss VAT for foreign companies is the subject of clarifications.
The recently published information on VAT allows the Federal Tax Administration (AFC) to summarize the most important points for foreign companies, but also to remove certain ambiguities.
Below you will find a summary of the most important points.
Compulsory tax liability
Following the modification of the law in force since January 1, 2018, foreign companies in Switzerland are subject to compulsory VAT from the first provision of services provided in Switzerland if their taxable worldwide turnover is equal to or greater than CHF 100,000. The turnover limit of non-profit sports and cultural associations or non-profit institutions is
Release from tax liability
According to the art. 10 para. 2 VAT Act or art. 121a OTVA, a foreign company does not have to register in the VAT register if it exclusively provides one or more of the following types of services, regardless of the amount of its turnover:
- excluded services (art. 2 para. 2 VAT Act)
- exempt services (art. 23 VAT Act)
- supply of services whose place of supply is in Switzerland within the meaning of art. 8 para. 1 VAT Act, except in the case of telecommunications or IT services provided to recipients who are not subject to supply of electricity by lines, of gas by the natural gas distribution network and of heat produced remotely to persons subject to national territory. If the conditions for compulsory tax liability are not met, it is possible to request voluntary registration in the register of persons liable to VAT at the earliest for the start of the current tax period. Registration must be maintained for at least a fiscal period (art. 11 VAT Act). In addition, in certain cases, even if tax liability is not compulsory in Switzerland, it is possible to recover the preliminary tax by means of a reimbursement procedure in accordance with art. 151 OTVA.
Keeping of accounts / custody obligation
Foreign companies which have neither domicile nor head office on Swiss territory and which do not keep separate accounts for activities carried out on Swiss territory must establish at least a statement of income and expenditure as well as of commercial assets for said activities in accordance with art. 128 OTVA. AFC. has published a work aid, a checklist for this purpose. Business activities must be able to be tracked from individual supporting documents and income and expense accounts to VAT statements. Foreign companies must also keep accounts, keep supporting documents, commercial documents and other relevant documents in accordance with the provisions of art. 70 para. 2 VAT Act until the absolute prescription of the tax claim (see art. 42 para. 6 VAT Act).
Simplified declaration of turnover
In principle, the worldwide turnover achieved must be indicated in the VAT statement in the figure 200. Foreign companies registered in the VAT register can make a simplified declaration if necessary. In the quarterly declarations, they can simply declare the turnover realized on the national territory and waive the declaration of the totality of their world turnover. However, this simplified declaration does not exempt a foreign company from correcting the preliminary tax based on Art. 30 VAT Act or to reduce it on the basis of Art. 33 VAT Act.
Source : Weka VAT newsletter no 5, Mai 2020