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 8.1%, 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.
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.