Skip to main content

From what point do I have to pay value added tax (VAT)?

In principle, all persons who engage in a self-employed business or professional activity must pay VAT. This obligation applies to both private individuals (e.g. sole proprietorships) and companies (e.g. general partnerships, GmbHs or AGs). The standard tax rate is 7.7%, although lower rates apply in some cases.

Exemptions from VAT obligation
There are various exemptions from the obligation to charge VAT. Firstly, the obligation to pay VAT only applies above a certain revenue or tax amount, and secondly, certain activities are exempt from VAT.

Persons who generate annual revenue of less than CHF 100,000 in Switzerland are generally exempt from the obligation to charge VAT. In addition, up to certain revenue limits, persons liable for VAT can choose whether to report effective VAT or to report VAT using net tax rates, which vary by industry. Small and medium-sized enterprises in particular benefit from the net tax rate method, as they sell their products and services to the consumer at the usual VAT rate, but owe the state a lower tax.

Exemptions and relief opportunities
In addition to these revenue and tax amount limits, there is an extensive list of tax exemptions and relief opportunities. There must be a review on a case-by-case basis whether a newly established business falls under an exception or can claim relief.

Voluntary VAT registration
If you are planning major investments for your company, it may make sense to register voluntarily for VAT even though there is no legal requirement to do so. In this case, you can deduct and reclaim the input tax on the investments.

Do you have any further questions or would you like to form your own company? The initial consultation with Foundera is no obligation and free of charge:

What else might interest you:

Founding an AG in Switzerland: Advantages and Disadvantages

What is a Swiss public limited company (AG) and what are the advantages and disadvantages of this legal form? The AG is probably the most adaptable legal form in Switzerland. The ...
Dario Morf
Dario Morf

GmbH: Pros and Cons

What is a Gesellschaft mit beschränkter Haftung (GmbH) (Swiss private limited company) and what are the pros and cons of this legal form? The GmbH is one of the most popular legal ...
Uwe Scheunemann
Uwe Scheunemann

Sole Proprietorship: Pros and Cons

What is a sole proprietorship and what are the pros and cons of this legal form? The sole proprietorship is the simplest way to set up a business and a condition for being ...
Uwe Scheunemann
Uwe Scheunemann

Differences between a GmbH and an AG

What’s the difference between a GmbH and an AG? GmbHs and AGs have much in common, but there are also some significant differences. The most important differences between the two ...
Alhaji Mansaray
Alhaji Mansaray