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For the first time in the history of Swiss value added tax, there may be a reduction in the standard and special VAT rates! Whether and to what extent a reduction will be introduced on 1 January 2018 is up to the Swiss voting population to decide on 24 September 2017 as part of the vote on the reform of Old-Age and Survivors In-surance (AHV).
Definitive consequences as at 31 December 2017
The temporary additional financing of disability insurance (IV) from VAT funds will come to an end on 31 December 2017. The three tax rates will automatically decrease as a result. However, an increase of 0.1% to finance the railway infrastructure (FABI) will also come into force on 1 January 2018. Taking both these effects into account, the tax rates as at 1 January 2018 would be as follows:
Standard rate: 7,7%
Special rate: 3,7%
Reduced rate: 2,5%
Possible consequences of the “Pensions 2020” reform programme
It is not yet known whether the standard and special tax rates will be subject to an additional increase for pension funding purposes as at 1 January 2018. If the voting population accepts the proposal put to the vote on 24 September 2017, the VAT rates will remain at their current levels.
Are you, your company and your accounting software ready for a change in tax rates?
If the voting population rejects the proposed reform of Old-Age and Survivors Insurance, VAT rates will be reduced from 1 January 2018. This will leave just over three months to prepare for the changeover. The following points will need to be taken into account if the tax rates are modified:
- Tax codes in accounting software:
New output and input tax codes will need to be introduced (standard rate: 7.7%, special rate: 3.8%).
- Applicable tax rate:
The date on which a service is provided is decisive for determining whether it should be invoiced at the current or new tax rates. Services provided before the end of 2017 should be invoiced at the current tax rates. If your company issues an invoice in December 2017 for a service that will not be provided until January 2018 or later, the new tax rate should be used.
With regard to input tax, the following principle applies: “The tax that has actually been invoiced may be deducted”, even if the tax rate shown is incorrect.
- Invoicing forms and templates will need to be modified
- Consequences to be taken into account in contracts, offers, etc.:
VAT must be indicated in contracts (either by specifying the tax rate as a percentage or by including the statement “plus statutory VAT”).
Conclusion and recommendations
If the increase in tax rates is rejected in the vote on 24 September 2017, there will only be a very short period of three months until the end of the year in which to implement all the necessary changes. Steps should be taken in advance, particularly with regard to IT system migration. Automatic booking processes and information printed on invoicing forms should be checked before 1 January 2018. In general, we advise against overwriting existing tax codes with the new rates. Instead, new tax codes should be entered with a new validity period.
For more information, please contact your personal advisor at PricewaterhouseCoopers or get in touch with our VAT specialists. We look for-ward to hearing from you!