English translation of Article 37 of the Swiss VAT Act 2010

 
This page contains an English translation of the below Article of the revised Swiss VATA 2010 and is part of a web based Swiss VATA 2010 commentary published in German. Should you require qualified written legal advice on cross-border transactions potentially triggering Swiss VAT  from a Swiss VAT lawyer please do not hesitate to contact: Harun Can

Article 37 of the Swiss VAT Act 2010

Filing using the net tax rate and the flat tax rate methods 

  1. If a taxable person does not generate more than 5,020,000 Swiss francs in  turnover from taxable supplies annually and in the same period does not have to pay more than 109,000 Swiss francs in tax, calculated at the net tax rate that applies to him, he may file his tax claim under the net tax rate method.

  2. When using the net tax rate method, the tax claim is determined by multiplying the sum of the taxable considerations inclusive of tax generated in the filing period, by the net tax rate approved by the Federal Tax Administration.

  3. The net tax rates take into account the usual input tax amounts in the relevant branch of the industry. They are fixed by the Federal Tax Administration after consultation with the industry association concerned; the Swiss Federal Audit Office shall regularly review the appropriateness of the net tax rates. 

  4. Authorisation to file under the net tax rate method must be requested from the Federal Tax Administration and the method must be used for at least one tax period. If the taxable person elects for the effective filing method, he may not change to the net tax rate method for at least three years. Changes are possible at the beginning of a tax period. 

  5. Public authorities and related institutions, in particular private hospitals and schools or licensed transport undertakings and associations and foundations may file using the flat tax rate method. The Federal Council will determine the details where this filing method is to be used.
 

Article 77 of the Swiss VAT Ordinance 2010 (Principles) clarifying Article 37 Section 1–4 of the Swiss VAT Act 2010

1. The taxable rendering of goods and services for consideration in Switzerland is to be considered in assessing whether the conditions under Article 37 of the Swiss VAT Act 2010 are fulfilled.

2. The net tax rate method cannot be chosen by taxable persons who:

a. can report using the flat tax rate method under Article 37 Section 5 of the Swiss VAT Act 2010;
b. use the deferral of payment procedure under Article 63 of the Swiss VAT Act 2010;
c. use group taxation under Article 13 of the Swiss VAT Act 2010;
d. have their place of business or a permanent establishment in the valley areas of Samnaun or Sampuoir;
e. generate more than 50 per cent of their turnovers from providing goods and services to another taxable person who reports using the effective method and at the same time control or are controlled by it.

3. Taxable persons who report using the net tax rate method cannot voluntarily  tax the provision of goods and services under Article 21 Section 2 Subsections 1–25, 27 and 29 of the Swiss VAT Act 2010.

Article 78 of the Swiss VAT Ordinance 2010 (Submission to the net tax rate method on commencement of tax liability) clarifying Article 37 Section 1–4 of the Swiss VAT Act 2010

1. Persons newly entered in the Register of Taxable Persons (VAT Register) who wish to submit to the net tax rate method must notify the Federal Tax Authorities in writing within 60 days of issuance of the VAT number.

2. The Federal Tax Authorities approve use of the net tax rate method if in the first12 months both the expected turnover and the expected taxes do not exceed the limits in Article 37 Section 1 of the Swiss VAT Act 2010.

3. If no notification is made within the period outlined in Section 1, the taxable person must report for at least three years using the effective method before he or she can submit to the net tax rate method. An earlier change to the net tax rate method is possible if the Federal Tax Authorities change the net tax rate of the relevant industry or business.

4. Sections 1–3 also apply to retroactive entries analogously.

5. The VAT chargeable on the inventory, the supplies and the fixed assets is taken into consideration in applying the net tax rate method.

Article 79 of the Swiss VAT Ordinance 2010 (Change from the effective reporting method to the net tax rate method) clarifying Article 37 Section 1–4 of the Swiss VAT Act 2010

1. Taxable persons who wish to change from the effective reporting method to the net tax rate method must notify the Federal Tax Authorities in writing at the latest 60 days after the beginning of the tax period from which the change is to be made. If the notification is late, the change is effective for the beginning of the subsequent tax period.

2. The Federal Tax Authorities approve use of the net tax rate method if in the prior 2 tax periods neither of the limits in Article 37 Section 1 of the Swiss VAT Act 2010 was exceeded.

3. On change from the effective reporting method to the net tax rate method no corrections or changes are made to the inventory, the supplies and the fixed assets.

4. If, simultaneously with submission to the net tax rate method, the manner of reporting under Article 39 of the Swiss VAT Act 2010 is also changed, the following corrections are to be under taken:

a. If a change is made from considerations upon agreed to considerations collected , the Federal Tax Authorities credit the taxable person with the tax at the appropriate statutory tax rate on the taxable goods and services invoiced but not yet paid at the date of change (debtor items) and at the same time charge the input tax on the taxable goods and supplies invoiced to it, but not yet paid (creditor items).
b. If a change is made from collected considerations to agreed upon considerations, the Federal Tax Authorities charge the tax on the debtor items existing at the date of change at the appropriate statutory tax rate and at the same time credit the input tax on the creditor items.

Article 80 of the Swiss VAT Ordinance 2010 (Withdrawal of the approval) clarifying Article 37 Section 1–4 of the Swiss VAT Act 2010

The Federal Tax Authorities can withdraw approval retroactively to use this reporting method from taxable persons who have been permitted use of the net tax rate method on the basis of false information.

Article 81 of the Swiss VAT Ordinance 2010 (Change from the net tax rate method to the effective reporting method) clarifying Article 37 Section 1–4 of the Swiss VAT Act 2010

1. Taxable persons who wish to change from the net tax rate method to the effective method must notify the Federal Tax Authorities in writing at the latest 60 days before the beginning of the tax period from which the change is to be made. If the notification is late, the change is effective from the beginning of the subsequent tax period.

2. Persons who exceed one or both limits laid down in Article 37 Section 1 of the Swiss VAT Act 2010 in two consecutive tax periods by up to 50 per cent must change to the effective reporting method at the beginning of the following tax period.

3. Persons who exceed one or both limits laid down in Article 37 Section 1 of the Swiss VAT Act 2010 by more than 50 per cent must change to the effective reporting method at the beginning of the following tax period. If the limits are exceeded in the first 12 months of submission to the net tax rate method, approval is withdrawn retroactively.

4 If one or both limits are exceeded by more than 50 per cent, resulting in the takeover of total or partial assets under the notification procedure, the taxable person can decide whether he or she wishes to change to the effective reporting method retroactively at the beginning of the tax period in which the takeover took place or at the beginning of the subsequent tax period.

5. Upon change to the effective reporting method there are no corrections to the inventory, the supplies, or the fixed assets.

6. If at the same time of the change to the effective reporting method the manner of reporting under Article 39 of the Swiss VAT Act 2010 is also changed, the following corrections are to be undertaken:

a. If a change is made from considerations agreed upon to collected considerations, the Federal Tax Authorities credit the taxable person with the tax on the debtor items existing at the date of change at the approved net tax rates. No corrections are to be undertaken on the creditor items.
b. If a change is made from considerations agreed upon to collected considerations, the Federal Tax Authorities charge the tax on the debtor items existing at the date of the change at the approved net tax rates. No corrections are to be undertaken on the creditor items.

Article 82 of the Swiss VAT Ordinance 2010 (End of tax liability) clarifying Article 37 Section 1–4 of the Swiss VAT Act 2010

1. If a taxable person reporting under the net tax rate method discontinues business or if, because it falls short of the turnover limit in Article 10 Section 2 (a) of the Swiss VAT Act 2010, he or she is exempt from tax liability, the turnovers generated up to striking out of the VAT Register, the work in progress and, if reporting according to collected considerations, the debtor items are also to be reported at the approved net tax rates.

2. The tax is to be reported on the fair market value of immoveable goods at the date of striking out of the VAT Register at the normal rate, if:

a. the goods were purchased, constructed or converted by the taxable person, when he or she reported using the effective method, and he or she has claimed the input tax deduction;
b. the goods were purchased by the taxable person during the time in which he or she reported using net tax rates, under the notification procedure from a taxable person reporting using the effective method.

3. In determining the fair market value of immoveable goods, for every year expired one twentieth is amortised on the straight line basis.

Article 83 of the Swiss VAT Ordinance 2010 (Takeover of assets under the notification procedure) clarifying Article 37 Section 1–4 of the Swiss VAT Act 2010

1. If a taxable person reporting under the net tax rate method does not use or uses only to a lesser extent all or part of the assets taken over using the notification procedure under Article 38 of the Swiss VAT Act 2010 than the seller of a business entitled to deduct input tax, the procedure is as follows:

a. If the seller reports under the net tax rate method, no corrections are to be undertaken.
b. If the seller reports under the effective method, on that part of the assets taken over used in future for a business not entitled to deduct the input tax, the own use in the sense of Article 31 of the Swiss VAT Act 2010 is to be reported taking into consideration Article 38 Section 4 of the Swiss VAT Act 2010.

2. If a taxable person reporting under the net tax rate method uses to a greater extent all or part of the assets taken over using the notification procedure under Article 38 of the Swiss VAT Act 2010 than the seller of a business entitled to deduct the input tax, no correction may be undertaken.

Article 84 of the Swiss VAT Ordinance 2010 (Reporting using net tax rates) clarifying Article 37 Section 1–4 of the Swiss VAT Act 2010

1. Taxable persons must report their business at the net tax rates approved by the Federal Tax Administration.

2. If a business is discontinued or a new business taken up or if the turnover shares of the business change in such a way that a new allocation of the net tax rates becomes necessary, the taxable person must contact the Federal Tax Authorities.

3. Taxable persons for whom two different net tax rates have been approved must record the revenues for each of the net tax rates separately.

Article 85 of the Swiss VAT Ordinance 2010 (Approval of the use of a single net tax rate) clarifying Article 37 Section 1–4 of the Swiss VAT Act 2010

The taxable person is permitted the use of a single net tax rate unless a case under Article 86 Section 1 or Article 89 Sections 3 or 5 is given.

Article 86 of the Swiss VAT Ordinance 2010 (Approval of the use of two net tax rates) clarifying Article 37 Section 1–4 of the Swiss VAT Act 2010

1. The taxable person is permitted the use of two net tax rates, if:

a. he or she carries on two or more businesses for which the net tax rates laid down by the Federal Tax Authorities differ; and
b. at least two of these businesses each have a share of more than 10 per cent of the total turnover.

2. The 10 per cent limit is calculated:

a. for persons who become newly taxable and for taxable persons who take up a new business: based on the expected turnovers;
b. for the other taxable persons: based on the turnover of the two preceding tax periods.

3. The turnovers of businesses with the same net tax rate are to be accumulated in investigating whether the 10 per cent limit is exceeded.

4. If for a taxable person who has been permitted the use of two net tax rates only one business, or several businesses for which the same net tax rate is foreseen, exceeds the 10 per cent limit during two consecutive tax periods, the approval for the use of the second net tax rate lapses at the beginning of the third tax period.

Article 87 of the Swiss VAT Ordinance 2010 (Level of the approved net tax rates) clarifying Article 37 Section 1–4 of the Swiss VAT Act 2010

1. If only two of the taxable person’s businesses exceed the 10 per cent limit, the use of the two net tax rates foreseen for these businesses will be approved.

2. If more than two businesses exceed the 10 per cent limit, use of the following net tax rates is approved:

a. the highest of the net tax rates that is foreseen for the relevant businesses whose share in the total turnover is more than 10 per cent;
b. a second net tax rate that the taxable person selects from those tax rates that are foreseen for the other businesses whose share in the total turnover is more than 10 per cent.

Article 88 of the Swiss VAT Ordinance 2010 (Taxation of the individual businesses) clarifying Article 37 Section 1–4 of the Swiss VAT Act 2010

The turnovers from businesses of the taxable person who has been permitted the use of two net tax rates are taxable:

a. at the higher approved net tax rate if the net tax rate foreseen for the business in question lies above the lower approved rate;
b. at the lower approved rate in the other cases.

Article 89 of the Swiss VAT Ordinance 2010 (Special rule for mixed industries) clarifying Article 37 Section 1–4 of the Swiss VAT Act 2010

1. Mixed industries are industries in which, as a rule, several businesses are carried on which, if considered separately, would be reported using different net tax rates.

2. The Federal Tax Authorities lay down in an ordinance:

a. the net tax rate applicable for each mixed industry;
b. the usual main and ancillary businesses in the mixed industry.

3. Articles 86–88 apply for reporting net tax rates if the share of a business usually ancillary to an industry or several businesses ancillary to an industry, for which under the ordinance of the Federal Tax Authorities the same net tax rate would be applicable, exceeds 50 per cent of the turnover of the main business and the business usually ancillary to an industry.

4. The 50 per cent limit is calculated:

a. for persons, who become newly taxable, and for taxable persons, who take up a new business: based on the expected turnovers;
b. for the other taxable persons: based on the turnover in the two preceding tax periods.

5. If a taxable person, who operates in a mixed industry, also carries on businesses that are alien to the industry, reporting using net tax rates for these businesses is governed by Articles 86–88.

Article 90 of the Swiss VAT Ordinance 2010 (Special procedures) clarifying Article 37 Section 1–4 of the Swiss VAT Act 2010

1. The Federal Tax Authorities makes a procedure available for the approximate  compensation of the input taxes incurred to taxable persons reporting using the net tax rate method:

a. Deliveries of goods abroad if the goods are self-manufactured or purchased with tax charge;
b. Supplies to beneficiaries under Article 2 of the Guest State Act dated 22 June 2007 (GSG), provided the place of delivery lies in Switzerland and for deliveries that the goods are self-manufactured or purchased with tax charge.

2. Taxable persons reporting using the net tax rate method who acquire used goods under Article 62 for resale to a customer in Switzerland can use the procedure made available by the Federal Tax Authorities to compensate the deemed input tax. The procedure is not applicable for used motor vehicles up to an overall weight of 3,500 kg.

3. For operations and events under Article 55 Section 3 the Federal Tax Authorities foresees a flat rate arrangement for the approximate division of the turnovers between the two net tax rates. 12 SR 192.12 84   

Article 91 of the Swiss VAT Act 2010 (Reporting of the acquisition tax) clarifying Article 37 Section 1–4 of the Swiss VAT Act 2010

Taxable persons who report using the net tax rate method and who acquire supplies from enterprises with their place of business abroad under Articles 45–49 of the Swiss VAT Act 2010 must pay the acquisition tax semi-annually at the appropriate statutory tax rate.

Article 92 of the Swiss VAT Ordinance 2010 (Own use) clarifying Article 37 Section 1–4 of the Swiss VAT Act 2010

Own use, except for Article 83 Section 1 (b), is considered in the use of the net tax rate method.

Article 93 of the Swiss VAT Ordinance 2010 (Corrections of immoveable goods) clarifying Article 37 Section 1–4 of the Swiss VAT Act 2010

1. If immoveable goods are no longer used for the business purposes of the taxable person or are used for a business excepted from the tax without credit under Article 21 Section 2 of the Swiss VAT Act 2010, the tax is to be charged on the fair market value at the normal rate, if:

a. the goods were purchased, constructed or converted by the taxable person when the person reported using the effective method and claimed the input tax deduction;
b. the goods were purchased by the taxable person during the time in which the person reported using the net tax rate method under the notification procedure from a taxable person reporting effectively.

2. In determining the fair market value of the immoveable goods, for every year expired one twentieth is amortised on a linear basis.

Article 94 of the Swiss VAT Ordinance 2010 (Supplies to closely related persons and employees) clarifying Article 37 Section 1–4 of the Swiss VAT Act 2010

1. Goods and services provided to closely related persons are, subject to Article 93, to be reported as follows when reporting using net tax rates:

a. Purchased goods and services that are given or rendered without any consideration are considered in the net tax rates and therefore do not have to be reported.
b. Self-manufactured goods and services that are given or rendered without any consideration are to be reported using the approved net tax rate at the amount that would be agreed between independent third parties.
c. Goods and services that are given or rendered for consideration are to be reported using the approved net tax rate for the consideration paid, but at least at the amount that would be agreed between independent third parties.
d. If two net tax rates are used for reporting and the supply of goods and services cannot be allocated to a business, the higher rate is used. 85 641.201 Taxes

2. Supplies of goods and services to employees are to be treated using net tax rates for reporting as follows:

a. Goods given and services rendered for consideration to employees are to be reported at the approved net tax rate.
b. If two net tax rates are used for reporting and the supply cannot be allocated to a business, the higher rate is used.

3. If the person employed is a closely related person and if there is no legal entitlement under the employment contract to the supply, Section 1 applies. If there is a legal entitlement, Section 2 applies.

4. Goods and services that have to be included in the salary certificate for direct tax purposes always count as being rendered for consideration.

Article 95 of the Swiss VAT Ordinance 2010 (Sales of supplies and fixed assets) clarifying Article 37 Section 1–4 of the Swiss VAT Act 2010

Sales of goods and services and fixed assets that are not made exclusively goods and services exempt from the tax without credit are to be taxed at the approved net tax rate. If two net tax rates are used for reporting and the supplies or the fixed asset were used for both businesses, the considerations are to be reported at the higher net tax rate.

Article 96 of the Swiss VAT Ordinance 2010 (Invoicing at an excessive tax rate) clarifying Article 37 Section 1–4 of the Swiss VAT Act 2010

If a taxable person reporting using net tax rates invoices a sale at an excessive tax rate, the person must, in addition to the VAT calculated at the net tax rate, also pay the difference between the tax calculated using the tax rate disclosed and the tax calculated using the tax rate under Article 25 of the Swiss VAT Act 2010. The consideration is regarded as including VAT. 3rd Section: Flat rate method.

Article 97 of the Swiss VAT Ordinance 2010 (Principles) clarifying Article 37 Section 5 of the Swiss VAT Act 2010

1. Related institutions under Article 37 Section 5 of the Swiss VAT Act 2010 are in particular municipal associations and other combinations of political units, parishes, private schools and boarding schools, private hospitals, medical treatment centres, rehabilitation centres, sanatoria, private home care organisations, old people’s homes, nursing homes, seniors residences, charitable enterprises, such as disabled workshops, hostels and special schools, operators of sports facilities and cultural centres supported by political units, cantonal building insurers, water cooperatives, public transport enterprises, forest corporations supported by political units, organisers of non-recurring cultural and sports events, associations under Articles 60–79 of the Civil Code13 (ZGB) and foundations under Articles 80–89bis ZGB.

2. There are no monetary limits for the use of the flat rate method.

3. Taxable persons, who report using the flat rate method, cannot voluntarily tax goods and services under Article 21 Section 2 Subsections 1–25, 27 and 29 of the Swiss VAT Act 2010 (opting).

Article 98 of the Swiss VAT Ordinance 2010 (Submission to the flat rate method and change of the reporting method) clarifying Article 37 Section 5 of the Swiss VAT Act 2010

1. Political units and related institutions under Article 97 Section 1 that wish to report using the flat rate method must notify the Federal Tax Authorities in writing.

2. The flat rate method must be retained for at least three tax periods. If the taxable person elects for the effective reporting method, the person can change to the flat rate method at the earliest after ten years. An earlier change is possible only if the Federal Tax Authorities change the flat tax rate for the business in question.

3. Changes of the reporting method are possible at the beginning of a tax period. They must be notified to the Federal Tax Authorities in writing at the latest 60 days after the beginning of the tax period from which the change is to be made. If the notification is late, the change is effective at the beginning of the subsequent tax period.

Article 99 of the Swiss VAT Ordinance 2010 (Flat rate tax) clarifying Article 37 Section 5 of the Swiss VAT Act 2010

1. When using the flat rate tax method the tax claim is determined by multiplying the total of the considerations generated in a reporting period, including tax, by the flat rate tax approved by the Federal Tax Authorities.

2. The Federal Tax Authorities established the flat tax rates taking into consideration the input tax element usual in the industry. A business for which no flat tax rate has been established is to be reported at the rate applicable for the net tax rate method.

3. The taxable person must report each of his or her businesses with the appropriate flat tax rate. The number of applicable flat tax rates is not limited.

 Article 100 of the Swiss VAT Ordinance 2010 (Applicability of the rules of the net tax rate method) clarifying Article 37 Section 5 of the Swiss VAT Act 2010

To the extent this section does not foresee a rule, Articles 77–96 apply additionally. 13 SR 210 87 641.201 Taxes

Article 166 of the Swiss VAT Ordinance 2010 (Choice of method) clarifying Article 37 and 114 of the Swiss VAT Act 2010

1. With the entry into force of the of the Swiss VAT Act 2010, the notice periods under Article 37 Section 4 of the Swiss VAT Act 2010 for changing from the effective reporting method to the net tax rate method and vice versa begin to run afresh.

2. With the entry into force of the of the Swiss VAT Act 2010, the notice periods under Article 98 Section 2 for changing from the effective reporting method to the flat tax rate method and vices versa begin to run afresh.

3. For cases in which Article 114 Section 2 of the Swiss VAT Act 2010 foresees a notice period of 90 days, this notice period takes precedence over the 60 days notice period under Articles 79, 81 and 98 of this ordinance.


Corresponding Article(s) of the EU VAT Directive (Recast) 2006/112/EC (as of January 2010)

Article 281 of the EU VAT Directive

Simplified procedures forcharging and collection

Member States which might encounter difficulties in applying the normal VAT arrangements to small enterprises, by reason of the activities or structure of such enterprises, may, subject to such conditions and limits as they may set, and after consulting the VAT Committee, apply simplified procedures, such as flat-rate schemes, for charging and collecting VAT provided that they do not lead to a reduction thereof.

 
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