Additional recommendations for practical implementation of the Swiss VAT rate increase per 2024

As of 01.01.2024, Switzerland will increase its VAT rates. A few weeks ago, the FTA published its practice on their implementation. Below an unofficial translation/summary of a memo in German, with additional recommendations for practical implementations.  Please do not hesitate to contact Christoph for the German language version of the full memo.

Contribution by Christoph M. Meier 
lic. oec. publ. / Mehrwertsteuer-Experte FH

In Switzerland, the VAT rates will be increased as follows as of 01.01.2024:
Swiss VAT rates Until 31.12.2023 From 01.01.2024
Standard rate 7.7% 8.1%
Reduced tax rate 2.5% 2.6%
Special rate for accommodation services 3.7% 3.8%

The increase is based on the referendum of 25.09.2022 and serves the financing of the AHV (Swiss pension system).

The FTA (Swiss Federal Tax Administration) has published its practical publication MWST-Info 19 (MI 19). The complete publication can be found HERE. This publication is legally binding.

The current principles correspond to those of the previous VAT rate changes, especially those as of 01.01.2018.

1. The decisive factor for the VAT rate to be applied is the time at which the service is performed. Therefore, neither the date of invoicing, nor the date of payment, nor the date of booking are decisive. In the case of periodic services (e.g. subscriptions), the period of period in which the service is provided is decisive. If services that are subject to both the previous and the new VAT rates, the date or period of performance of the service and the proportion of the amount attributable to each must be shown separately on the invoice. If this is not the case, the entire amount is subject to the new VAT rates. This also applies to VAT levied from the purchaser.
2. Partial payments and partial invoices: Partial payments for services rendered up to 31.12.2023 are subject to the old VAT rates. The FTA recommends that orders that have not yet been completed should be invoiced at the end of 2023. In the case of construction work, the time of performance is deemed to be the execution of work on the structure (e.g. the assembly, moving or fastening).
3. Advance payments and advance payment invoices: If it is known at the time of the advance payment or advance payment invoice that the delivery or service will be wholly or partially performed after after 31.12.2023, the part of the service attributable to the period from 01.01.2024 may already be listed at the new VAT rate.
4. Periodic services: Rental and leasing contracts, subscriptions or service and maintenance contracts, e.g. for lifts, household machines, computer systems and the like are generally payable in advance. If such a subscription or contract extends beyond the date of the tax rate increase (01.01.2024), the fee must be divided pro rata temporis between the previous and new VAT rates.
5. Reductions in remuneration (discounts, rebates, notices of defects or losses) for services rendered before 01.01.2024 are to be corrected with the previous VAT rate.
6. Returns of items and reversals of services must be made at the rates applicable at the time (or period) of performance.
7. Importation of goods: The new VAT rates apply to all imports of goods for which the import tax liability arises on 01.01.2024 or later.
8. Input tax deduction: If a service provider corrects its previous invoices and invoices the tax difference with reference to the original invoice with an incorrect VAT rate, the service recipient may claim the input tax deduction for this.
9. In the VAT statement Q3 2023, the sales can be declared for the first time at both the previous and the new VAT rates.
10. Balance tax rates: These will also be adjusted. The same applies to the limits (turnover limit as well as tax payment burden) for the application of this accounting method. The
    current VAT rate change does not entitle to an extraordinary change from or to this method, the general deadlines apply.

Further recommendations

• Implement the new VAT rates in the accounting and billing systems in good time. Also take into account VAT tax codes, accounting accounts, etc.
• Companies that provide services spanning several years and already invoice such services in 2023 should adjust their invoicing process accordingly in good time.
• Check contracts and other VAT-relevant documents in good time (e.g. price lists, cash receipts from cash registers, etc.) and adjust them accordingly if necessary.
• Inform and train all persons involved in good time, for example from accounting/finance, sales, purchasing, etc.
• For quotations and contracts, we recommend a general wording such as “excluding VAT due based on applicable rules”.
• The VAT rate must be stated as a percentage; for example, net amount, plus 8.1% VAT, gross amount; or “Invoice amount incl. 8.1% VAT”.