Increase in VAT rates on 1 January 2024

On 25 September 2022, the Swiss people voted in favour of increasing the VAT rates applicable in Switzerland to cover the expected deficit in the AHV scheme.

VAT rates in Switzerland will therefore be increased as follows* from 1 January 2024:

With 1 January 2024 fast approaching, businesses subject to VAT in Switzerland need to anticipate these changes, which are often more complex than they appear, and ensure a transition that takes account of the old and new rates.

This is because ERP and accounting systems will have to be adapted to the new rates well before 1 January 2024, particularly in the case of taxable persons providing services over several periods.

* The increase in the statutory rates also entails a corresponding adjustment to the net tax liability rates / flat rates (list of the new applicable rates published on the Federal Tax Administration (FTA) website).)

Determining the applicable rate

In VAT, the tax liability arises at the time of invoicing, or upon collection in the case of settlement according to the consideration received. What is decisive in determining the applicable VAT rate, however, is not the date of the invoice or of collection, but the date or period on which the service is provided.

It is therefore essential to be able to determine the date/period when the service is provided: services provided before 1 January 2024 will be subject to the old rates and services provided after 1 January 2024 will be subject to the new rates.

Services provided over several periods:

Determining the date/period when the service is provided is not always easy:

• In some areas, services are provided over several periods. For example, maintenance and service contracts, telecommunication contracts, subscriptions (sport, newspapers...), annual/seasonal rentals, leasing contracts, construction services, electricity and gas distribution...
• Certain difficulties may also arise in the case of advance payments, invoicing of ongoing services, application of discounts, credit notes, return of goods, etc.

If a subscription or contract extends beyond the date on which the rate increase comes into force, the consideration must be allocated on a pro rata temporis basis between the old and new rates.

Thus, the invoice for a fitness or course subscription covering both 2023 and 2024 must apportion the consideration and subject each part of the consideration to the rate applicable «pro rata temporis» between 2023 and 2024. If this allocation is not made, the entire consideration will be subject to the higher rate.

When should the old tax rates be applied? And when should the new rates be applied?

Declaration in VAT statements

Turnover may be reported for the first time at both the old and the new tax rates in the 3rd quarter of 2023 (in the case of the effective tax rate method or the flat-rate method), in the 2nd half of 2023 (in the case of the net tax rate method) and in July 2023 (in the case of the monthly tax rate method).

Counter-claims which must be declared in previous statements but which relate to services to be provided from 1 January 2024 must first be declared at the old rates. They may be corrected at the earliest in the statement for the 3rd quarter of 2023, the 2nd half of 2023 or the statement for July 2023.

Recommendations and points of attention for your company

It is now important for VAT taxpayers in Switzerland to pay particular attention to these rate changes and in particular :

• Putting in place an ERP systems adaptation plan to ensure a transition of systems that takes account of both the old and the new VAT rates.
• Determine which additional VAT codes need to be created to manage the new rates (don't forget the credit notes).
• Inform employees of this change.
• Examine incoming and outgoing transactions to determine the date of supply of the service and validate the applicable VAT rate.
• Revising the format of invoices to potentially include two VAT rates and adapting automatic reporting at VAT statement level.
• Review contracts/terms and conditions to reflect the new rates from 1 January 2024 and pay attention to prepayments.

Detailed information on the administrative practice relating to this increase can be found in Info TVA 19. «Increase in VAT rates on 1 January 2024».» published by the AFC.