How much VAT will you pay for 1 franc of turnover in Switzerland?

Be it a necessary evil or smart compliance, VAT is a key topic – and now also concerns companies without a business location in Switzerland, from their very first franc of turnover in Switzerland.

You operate a shuttle company headquartered abroad and drive passengers to a Swiss airport. Or you are a kitchen manufacturer in the EU and equip houses in Switzerland with the latest designs. Or you are responsible for catering at an event on the Swiss side of the border. These examples have one thing in common: since 1 January 2018 all these companies have been subject to the partially revised Swiss Federal Act on Value Added Tax (VAT Act) – with far-reaching consequences.

New VAT provisions for all companies without a business location in Switzerland

If your company does not have a business location in Switzerland, the revised VAT Act introduces changes to the VAT registration obligation. Your company may be subject to Swiss VAT even if it is not established in Switzerland. The key question is whether your services have a connection to Switzerland. In principle, this is the case if your company generates turnover in Switzerland. This means that Switzerland represents a place of supply for VAT – which you will have to pay.

From the very first franc

Your tax liability in Switzerland is not determined by your turnover in Switzerland, but by your global turnover. If you generate less than CHF 100,000 from your services in Switzerland, but at least CHF 100,000 internationally, from 2018 onwards you are subject to VAT in Switzerland from the very first franc of turnover.

Low-value consignments remain exempt from tax on importation. However, under the new VAT legislation, (online) retailers that generate over CHF 100,000 of turnover per year in Switzerland through the supply of goods will be liable for VAT from 1 January 2019 onwards. In other words, you must charge Swiss VAT on services of this type.

From now on: proceed step by step

You no doubt wish to continue your business operations in Switzerland. To do so, you need an intelligent solution that avoids excessive costs and tedious complexity. We recommend proceeding as follows – if possible very soon, because the revised VAT Act has been in force since the beginning of the year.

  1. Register for Swiss VAT to receive your Swiss VAT number.
  2. Appoint a reliable fiscal representative to deal with the Swiss tax authorities on your behalf.
  3. Register for the electronic filing of quarterly Swiss VAT declarations.
  4. Submit the required quarterly VAT declarations.
  5. Keep an overview of all your correspondence with the tax authorities – including your replies.

Clever solution with Smart VAT

We have developed an online solution that is both simple and fast, and exclusively designed for businesses like yours: Smart VAT. This platform offers a number of advantages at the same time: Your VAT registration only takes a few moments. You can then continue your business activities in Switzerland without any interruptions – and with peace of mind, because you are acting fully in compliance with the law. And last but not least, Smart VAT is as simple and user friendly as online banking. And remember: registration for Smart VAT is free of charge. You simply pay a minimum annual fee for fiscal representation.

Find out more about Smart VAT here.

Contact

Julia Sailer
Director, VAT compliance services leader
+41 58 792 44 57
julia.sailer@ch.pwc.com

EMEA PE Webcast Series – Episode Four – VAT consequences of a corporate tax permanent establishment

Tuesday, 17 April 2018, 3.00 – 3.45 pm CET

After a short break, we are pleased to inform you that we will resume the PE Webcast Series, with Episode 4 – VAT consequences of a corporate tax permanent establishment.

In this webcast specialists from our international tax and VAT practice will compare the objectives and concepts of a corporate tax permanent establishment with a VAT fixed establishment (FE).

We will walk through practical examples to demonstrate the interaction of these rules, outlining the VAT consequences of creating a corporate tax PE, as well as the corporate tax position if you have a VAT FE.  As part of the discussion we will highlight trends in the application of PE and FE rules by tax authorities, leading in some cases to a blurring of the concepts.

You will have the chance to raise questions directly to our specialists.

Speakers for episode four will include:

  • Monica Cohen-Dumani – Partner, International Tax Services, EMEA ITS Leader – PwC Switzerland
  • Ine Lejeune – Partner Tax Policy, Dispute Resolution & Litigation – Law Square
  • Herman van Kesteren – Partner Indirect Taxes – PwC Netherlands

Registration Link

Complete the required registration fields and select “Submit”.
Once you have registered, you will receive the WebEx access details. The WebEx will be recorded and you will receive a link to the recording via e-mail after the event using the same details. There will be time for questions and answers with your speakers during the WebEx. Questions can also be sent in advance of the
WebEx session to the following email address: grasiele.neves@ch.pwc.com

We do hope that you will join us online!

Best regards,
Monica Cohen-Dumani

Contact

Monica Cohen-Dumani
Partner, EMEA ITS Central Cluster Leader
+41 58 792 97 18
monica.cohen.dumani@ch.pwc.com

Grasiele Teixeira Neves
International tax services
+41 58 792 98 25
grasiele.neves@ch.pwc.com

Geneva International VAT Breakfast: E-invoicing & hot topics in indirect taxes

E-invoicing & hot topics in indirect taxes

So far, 2018 has been a very dense year for indirect tax professionals with various hot topics arising. In Switzerland, for instance, the recent clear rejection of the initiative “No Billag” will lead to changes in the scope of the radio-television fees that will be applicable to businesses as from 1 January 2019.

At the same time, compliance with e-invoicing and e-archiving obligations are being introduced in various jurisdictions such as Italy. During our upcoming event, we will go through the new rules and the compliance obligations across EU and Switzerland in terms of e-invoicing and e-archiving.

We will also follow up on the definition of fixed establishment providing insight on the recent developments particularly in Poland. The International VAT Breakfast will also feature recent hot topics that can impact businesses operating worldwide, such as the EU commission proposal for flexible VAT rates, the measures to strengthen VAT fraud prevention adopted by EU and non-EU countries and the introduction of the reverse charge mechanism for imports of goods in Portugal as from 1 March 2018.

Finally, as always, we will share with you the most significant developments with respect to the EU and Swiss case law.

To register for this event: Click here

Contact us

Patricia More
Tel.+41 58 792 95 07
patricia.more@ch.pwc.com

Manage VAT risk and gain valuable business insight with VATwatch

What’s the problem?

Being in control of your VAT data is becoming more crucial than ever. This stems from the fact that the tax authorities could have more information about your company’s VAT operations than you do. How is this possible?

It’s down to the growing complexity of the indirect tax compliance and control framework and the emergence of new reporting requirements globally. In response to these developments, tax authorities are no longer conducting sample checks, since they can use instant access to a company’s ‘raw’ accounting data and scan them to assess its VAT liability.

If you don’t have proactive control processes to review your transactional data and take action before this information is transmitted to the tax authorities, the consequences can be severe: more VAT audits, and increasingly complex questions from the authorities.

How can VATwatch help?

PwC’s VATwatch solution gives you a global overview of your flows, and helps you detect potential discrepancies and mismatches within your data before they’re identified by the tax authorities.

How can VATwatch help you manage VAT risk and gain valuable business insight?

Read more about VATwatch here to find out more about the benefits of our solution.

Do not hesitate to contact us to further discuss your situation.

Patricia More, TLS VAT Partner, PwC Geneva
+41 58 792 95 07 / patricia.more@ch.pwc.com

Antoine Wüthrich, Risk Assurance Partner, PwC Geneva
+41 58 792 82 27 / antoine.wuthrich@ch.pwc.com

Luxembourg to introduce VAT grouping

The Luxembourg Ministry of Finance announced last week that Luxembourg will introduce VAT grouping. The draft law will be submitted in the coming weeks to Parliament and the EU consultation process will be run in parallel. The date of entry into force must still be confirmed and it depends on the speed and the outcome of the legislative process. Bearing in mind the speed with which Luxembourg used to adopt new legislation, the VAT grouping provisions may already be available in autumn 2018.

On the above basis, Swiss businesses having subsidiaries in Luxembourg should undertake an assessment of the prospective VAT benefits of the VAT group in Luxembourg and the impact on the input VAT recovery position. Additionally, attention should be given to the Luxembourg companies having branches in the Member States of the European Union, which implemented the judgment of the Court of Justice of the European Union in Skandia, i.e. branches of a VAT grouped head offices are to be viewed as a separate taxable person with the consequence that any cost allocations between the VAT grouped head office and its branch are considered to be supplies for VAT purposes subject to VAT under the reverse charge. If the activity of the branch is to a greater extent exempt from VAT, the reverse charge VAT due on the cost allocations from the head office would lead to additional irrecoverable VAT. This is dependent on the way and the extent in which the Member State of the branch has implemented the Skandia provisions (e.g. Italy has recently fully implemented the Skandia judgment).

With the above in mind, it is now a good time to undertake an impact assessment (i.e. benefit of VAT grouping of the Luxembourg established companies vs the impact of this VAT grouping on the European branches (i.e. reverse charge VAT liability) because of the Skandia provisions) and explore options for the most beneficial set-up.

We are happy to advise you further on the above.

Contact Us

Dr. Niklaus Honauer
Partner, Indirect Taxes, Zürich
+41 58 792 59 42
niklaus.honauer@ch.pwc.com

Marcella Dzienisik
Senior Manager, VAT for financial services, Zürich
+41 58 792 49 38
marcella.dzienisik@ch.pwc.com

Radio and TV fees for businesses from 1 January 2019

The Swiss people firmly rejected the ‘No Billag’ initiative on 4 March 2018. As a result, all VAT Register-listed businesses with an global turnover of more than CHF 500,000 will have to pay a business licence fee, regardless of whether or how much TV and radio they actually receive. As the fee is linked to inclusion in the VAT Register and the company’s global revenue is taken into consideration, the maximum fee of CHF 35,590 may vastly exceed the VAT incurred in Switzerland.

The business fee from 1 January 2019
From 1 January 2019 all VAT Register-listed businesses with a global turnover of more than CHF 500,000 must pay not only VAT to the FTA, but also the licence fee, as per Article 70 of the Radio and Television Act (RTVG). This is assessed according to the company’s global revenue, and the VAT classification is not a factor in the calculation. The fee is graded as follows:

The regulation on the RTVG sets out several options for corporations to reduce the licence fee. If several companies apply group taxation in the sense of Article 13 of the VAT Act, the aggregate turnover of the VAT group is used in the assessment, so that only one fee is payable. In addition, a corporate fee group may be constituted by combining at least 30 businesses. In this case, too, only one fee is payable based on the consolidated revenue. The same principles apply for formation, changes in the composition and dissolution of the group as for group taxation.

As the business levy is linked to inclusion in the VAT Register, foreign businesses are liable for the fee, even if they are registered in Switzerland without a presence (i.e. a permanent establishment) for installation services or for the rendering of electronic services. As the reference point is the global revenue, minimal revenue in Switzerland may still trigger the business fee up to the maximum of CHF 35,590. It would be welcome if the Federal Office of Communications (OFCOM) were to investigate whether exemptions from or restrictions on the duty to pay the fee should be created for such companies.

Summary and recommendation
As every business listed in the VAT Register is liable for the fee, corporate groups should now review their consolidation options and perhaps opt for group taxation, even if this has not hitherto proven beneficial from a VAT perspective.

For further information, please contact your personal PricewaterhouseCoopers consultant or our VAT specialists. We look forward to hearing from you.

Contact Us

Michaela Merz
Partner, Leader Indirect Taxes, Zurich
+41 58 792 44 29
michaela.merz@ch.pwc.com

Dr. Niklaus Honauer
Partner, Indirect Taxes, Zürich
+41 58 792 59 42
niklaus.honauer@ch.pwc.com

Julia Sailer
Director, Leader VAT Compliance, Zurich
+41 58 792 44 57
julia.sailer@ch.pwc.com

 

Doing business with Latin America: Coping with the realities of ‘free’ trade with the Pacific Alliance

 

Nora Zs. Bartos was one of the speakers at a recent seminar held by the Latin American Chamber of Commerce. Her presentation was about the considerable tax and legal challenges of doing business in the Pacific Alliance. The fact that it got such a great response suggests that this is a highly topical issue for companies in Switzerland. We would therefore like to summarise the main points as a resource for organisations seeking to harness the opportunities in this region of Latin America.

With around 230 million inhabitants and a combined GDP of almost USD 1.9 trillion, the four member states of the Pacific Alliance (PA) – Chile, Colombia, Mexico and Peru – are a hugely attractive market committed to free trade. Since its inception in 2011, the PA has removed numerous obstacles to trade. More than 90% of trading in goods is already tariff-free, and the goal is to reach 100% within a few years. From a distance, it is an unclouded success story. However, if you are a Swiss company looking to do business with the PA, the reality is more complicated. Obstacles remain. It pays to be aware of them and what to do about them. A state-of-the-art enterprise resource planning (ERP) system is necessary.

In addition to removing tariffs on practically all trading in goods, the Pacific Alliance has already simplified customs processes, enhanced cooperation between sanitary and health authorities, and created a common platform for trading the shares of the four countries’ stock exchanges. In the long term it aims to achieve the ‘four freedoms’ that characterise the European Single Market: the uninhibited movement of goods, capital, services, and people.

The problem is that actual integration lags behind the ambition. While there is a free trade agreement between EFTA (of which Switzerland is a member) and the PA, it is difficult to work out what regulation applies for a particular transaction and whether your company can actually benefit from the agreement. Straightforward exports from Switzerland to an alliance member are relatively simple. Nevertheless, when a transaction involves several countries, things get tricky – exacerbated by the fact that rules of origin are not streamlined.

If you want to capitalise on the opportunities, state-of-the-art enterprise resource planning (ERP) software is necessary. A functioning ERP system enables you to collect, process and eventually present all the data needed to comply with regulation. It serves as a basis for reorganising your international supply chain to be more cost-efficient. Evaluating the probable total costs of different supply chains is a challenge when your business takes in a complex and unpredictable environment like the Pacific Alliance, but the right ERP system will give you greater clarity and understanding of what is actually involved.

At PwC, we specialise in helping clients find the most suitable ERP solution, implement the software, and interpret the results. Ultimately, we want to avoid a situation where you fail to see or misunderstand a regulation and realise in hindsight that you have lost part of the cost savings owing to administrative fees and obstacles. Our aim is to empower you to do profitable business with Latin America.

Contact Us

Dr. Nora Bartos
TLS Senior Manager
VAT, Customs and Excise
+41 58 792 51 14
nora.bartos@ch.pwc.com

Geneva International VAT Breakfast – New Year and new challenges in Indirect Taxes

International VAT Breakfast

In the fever of December’s last moment, many VAT topics such as the GST implementation in India or the change of the Swiss VAT rates across systems before New Year could have gone unspotted. For those who manage indirect taxes, it is clear that unnoticed changes can have significant consequences.

As a New Year’s resolution, during our next VAT Breakfast, we will look into recent topics that enable strategic development as well as those that are less game-changing but nevertheless require your attention in the start of 2018.

From a strategic perspective, we will address the latest progress in Brexit negotiations, the implementation of GST in India and the introduction of VAT in the GCC. We will also discuss the latest updates about the EU Commission initiatives and the upcoming end of the Cross Boarder Ruling pilot. Sharing feedback from various European countries, we will focus on reporting developments in 2017/2018 in Poland, Hungary and Serbia; the introduction of anti-fraud measures such as split payment in Romania, Poland and Italy; the reporting of imported e-services in Turkey as well as the Polish transport package.

Finally, we want to share with you the lessons learned and the biggest challenges faced in the first months after the Swiss VAT reform and the recent Swiss / EU case law. We hope to receive your views in return.

To register for this event: Click Here

Contact Us

Patricia More
Tel.+41 58 792 95 07
patricia.more@ch.pwc.com

NPO VAT Community breakfast: How will the VAT law revision impact your organisation?

On 1 January 2018, the VAT law revision will enter into force with many impacts for Swiss companies, associations and foundations, as well as foreign companies and non-profit organizations. VAT regulations rules and relevant turnover for determining threshold will change.

Are you wondering what this revision means for your organization?
Join our next NPO VAT community breakfast, which will take place on Tuesday 16 January at the PwC Geneva office from 8.30 – 11.00 am.

Details and registration

What should you expect from this event?

  • Get a first overview on the law revision’s impacts
  • Study comparative cases and examples
  • Discuss your current concerns & challenges
  • Get insight and recommendations from our PwC experts
  • Network with VAT peers from non-profit organizations

EU Commission publishes a proposal for the Definitive VAT System for Cross Border EU Trade

As part of the VAT action plan introduced on 7 April 2016, the EU Commission announced a legislative Proposal for the Definitive VAT System for Cross Border EU Trade.

This proposal was published on October 4th, 2017 (hereafter referred to as the “Proposal”) and introduces the cornerstones of the Definitive VAT System for Cross Border B2B EU trade[1]. This will be followed by a second proposal which is expected to be published in 2018 which will provide detailed technical provisions and guidelines on the application of the Definitive VAT System and the use of the transitional measure (two-step approach: quick wins in 2019 and definitive VAT regime in 2022).

The current VAT system characterizes each EU B2B cross border supply of goods in (1) an exempt intra-Community supply in the Member State of departure and (2) a taxable intra-Community acquisition in the Member State of arrival of the goods. The Proposal foresees in the introduction of one taxable supply in the Member State of destination of the goods, the so-called intra-Union supply. As a first step of the Definitive VAT System, the Proposal introduces the concept of a Certified Taxable Person or CTP. This concept allows for an attestation that a business can globally be considered as a reliable taxpayer. Only when the intra-Union supply is performed for a CTP, the supplier can apply the reverse charge mechanism. This means that when the buyer is not a CTP, the supplier will be liable for the payment of VAT in the destination country through a one stop shop mechanism.

To meet the request of the Council, as stated in the Council Conclusions of November 2016, the Proposal also foresees further amendments to the VAT Directive (so-called quick wins) in regards to VAT Identification Numbers, Chain Transactions and Call Off Stocks. The Council also requested the Commission to draft a common framework with respect to the documentation required to claim an exemption for intra-Community supplies, the latter is included in the proposal amending the VAT Implementing Regulation.

In respect to Call off Stocks (i.e. the situation where a vendor transfers goods to a warehouse for the disposal of a known acquirer to another Member State and that acquirer becomes the owner of the goods upon withdrawing the goods from the warehouse), the proposed solution considers the Call Off Stock as giving rise to one single transaction i.e. intra-community supply in the Member State of departure and an intra-Community acquisition in the Member State of arrival provided this is performed between two CTPs. In addition the application of the VAT exemption for intra-Community supplies is made conditional upon the valid EU VAT registration of the acquirer.

That said, in the case where one party in the transaction to Call Off Stocks is not a CTP, it is likely that the vendor will have to obtain a VAT registration in the country where the warehouse is located and to account for the VAT in the destination country. Given this added complication introduced as part of the Proposal, it is unlikely that the Member States will be able to maintain their existing specific regimes in their respective territories.

Last but not least, the Proposal foresees that in cases involving Chain Transactions the transport is to be assigned to the first leg of the chain transactions if (i) the intermediate supplier has a VAT registration in another Member State than the Member State of departure, (ii) this intermediate supplier communicates to the initial supplier that the name of the Member State of arrival and (iii) both the intermediate supplier and the initial supplier are CTPs. When one of the conditions (i) or (ii) is not met the transport is allocated to the second leg of the chain transactions.

In the event that a non-CTP is involved, the automatic allocation of the transport will not apply and, thus, the parties will still have to document and demonstrate to which transaction the transport is allocated and apply the related VAT regime to the said transaction (domestic supply, intracommunity supply, etc.).

The Proposal for implementing regulations requires the Member States to apply the provisions as of 1 January 2019. Although there is still more than a year to go, companies should already be planning and evaluating what implications this can have on their supply chains.

In addition if these provisions focus primarily on the cross border EU trade of goods, one cannot exclude that the concept of Certified Tax Person will be extend to the B2B supply of services taking into account the existing background and the fact that such concept was discussed and considered during the implementation of the VAT package in 2010.

Within the next three months, companies should take the following actions:

  • Map Intra-Union Flows

    Detailed mapping of intra-Union flows will allow you to measure potential impacts of the change on your business and adopt an action plan (e.g., update IT systems, adjust invoice templates, manage VAT registration requirements, train your staff, review offers, contracts and agreements, etc.)

  • Assess Applying for Certified Tax Person Status

    Depending on your business flows and organisation, obtaining Certified Tax Person status could be required.

Download full newsletter

We look forward to supporting you in enabling your employees, IT systems and processes to deal with the new intra-Union VAT regime and managing your VAT position.

Contacts

Patricia More
Partner VAT, PwC Geneva
Tel. +41 58 792 95 07
patricia.more@ch.pwc.com