Swiss VAT support: Taxamo continues to scale new heights

Mon Jul 25, 2016

Compliance with international tax regimes can be a mountain to climb for merchants that’s why we continue to expand and today can unveil our Swiss VAT support.

Swiss VAT support

Swiss VAT support: the key element to digital sales

Since January 1, 2010, the Swiss Federal Tax Authority (FTA) has levied a value added tax (VAT) on the supply of services from non-resident companies to Swiss residents.

Article 10 of the Swiss VAT Act states that VAT is applied to a service supplied from “any person who carries on a business based abroad that supplies telecommunication or electronic services on Swiss territory to recipients who are not liable to the tax”.

So, what does this mean? It means that a company that supplies digital goods or services to a Swiss-based consumer (so a B2C sale) must account for, collect, and remit VAT to the Swiss FTA.

Switzerland currently operates with a registration threshold of CHF 100.000 (circa €91,000; USD$104,000, and GBP£71,500). This means that a company supplying services to consumers based in Switzerland only needs to register for VAT if they have sales over CHF 100.000 to Swiss consumers.

This is the state of play in June 2016 but there are plans to change how this threshold is calculated. The proposed new method of calculating the threshold will be based on total global sales of the business rather than based just on the sales to Swiss consumers. The change in threshold will mean any business who sells more than $104,000 in digital goods globally will have to charge, collect and remit VAT on their Swiss sales.

While this change to calculation for Swiss VAT was due to be introduced in January 2017, this rule has since been flagged for introduction in January 2018, the reason for altering the introduction of this new rule is to allow affected companies breathing space and to achieve compliance.

You have been warned!

Swiss digital services marketplace

Here at Taxamo we now support Swiss VAT compliance as we know how important this market is for many of our merchants.

Using available base data – compiled by Statista – we get a picture of a vibrant and rapidly growing Swiss electronic services marketplace.

The Swiss eServices market is tipped to grow from the 2016 figure of USD$3.7 billion to USD$6.6 billion by 2020. That’s a 78% increase over four years. Later we will see that the eBooks market segment is expected to more than double in the same time period.

Here are some of the highlights of Statista’s Swiss eServices market research:

  • A 2016 market size of USD$3.72 billion.
  • Revenue is expected to show an annual growth rate (CAGR 2016-2020) of 15.60% resulting in a market volume of USD$6.65 billion in 2020.
  • User penetration is at 76.73% in 2016 and is expected to hit 83.77% in 2020.
  • The average revenue per user (ARPU) currently amounts to USD$686.86.

Statista’s research on the Swiss digital media market provides us with the following information:

It will be worth USD$384.9m in 2016. The market’s largest segment is ‘digital games’ with a market volume of USD$163.6m in 2016. That means that sales of digital games account for 40% of the total digital media market value in Switzerland.

What does Taxamo Swiss VAT support mean?

When we support a new tax jurisdiction it means that we take care of all the relevant compliance requirements.

It’s not just about compliantly determining the correct tax rate to apply (a service, by the way, that we provide in real-time), but it’s just as much about compliant invoicing, reporting, and applying the correct foreign exchange rate calculation to international transactions.

We have all angles of VAT compliance covered for digital service merchants with consumers in Switzerland. This includes critical threshold monitoring and up-to-date FX rates as well as fully-compliant invoicing and VAT settlement reports.

Our solution has been robustly road-tested since its launch in January 2015 to coincide with the introduction of new digital service place of supply rules by the European Commission. These very rules – around which our digital tax solution is designed – are now being used as the benchmark for the taxation of digital services by tax jurisdictions across the globe. In the next year alone New Zealand (October 2016), Russia (January 2017), and Australia (July 2017) will introduce new rules on the supply of digital services that closely mirror those introduced back in January 2015 in the European Union.

This is why our solution exists, and it is why we have now added Switzerland to our stable of supported tax jurisdictions.

Note: Taxamo content is created for guidance only, please consult your local tax advisor for professional advice.

Contact us to find out more about our solution