The Swiss Federal Taxation Administration (FTA) has initiated a public consultation on proposed amendments that would mandate digital platforms to collect VAT starting 1 January, 2025.
Principles and objectives of the legislation
In order to improve the collection of VAT while reducing the administrative burden on sellers and the FTA, persons who facilitate sales of goods through digital platforms (or any electronic interface) are required to be involved in VAT collection.
Under Article 20a paragraph 1 of the VATA, the persons operating these interfaces are, in fact, under certain conditions, deemed to have themselves supplied the goods for the sales that they have facilitated. As such, they are therefore liable for VAT on these sales when the place of the supply is on Swiss territory.
The notional application creates two consecutive supply relationships:
- Underlying seller – digital platform (recipient of the supply); and
- Digital platform (new supplier) – recipient of the supply.
If the platform has been entered in the Register of Taxable Persons, the first (notional) supply of goods between the seller and the platform is either deemed to be supplied abroad or exempt from tax (Art. 23 para. 2 no. 13 VATA).
Foreign sellers who only make this type of supply have no VAT obligations on Swiss territory, which makes it possible to limit the number of taxable persons (one platform instead of dozens of sellers).
At the same time, the scenarios in which the person deemed to be the person making the supply is not registered as a taxable person are also limited, namely by grouping the consignments of several sellers with the platform facilitating them. For sellers who are taxable persons making supplies of goods on Swiss territory, the exemption also makes it possible to facilitate relations with the platform from a formal perspective.
Not only these platforms but also platforms facilitating other types of supplies (other supplies of goods and services) will be among the third parties obliged to provide information (Art. 73 para. 2 let. e VATA) and will have to supply information to the FTA – of their own accord for some or on request for others – on some of the persons making a supply who are active on the interface that they are operating.
Background
If the VAT that would be payable on a consignment imported onto Swiss territory is below CHF 5, this consignment will not be taxed when it is imported (Art. 53 para. 1 let. a VATA; Art. 1 let. d of the FDF Ordinance on the tax-exempt import of goods in small quantities, of insignificant value or with a negligible tax amount).
Before 2019, businesses that made such supplies did not have tax liability obligations on Swiss territory (place of supply of goods abroad according to Art. 7 para. 1 let. a VATA). Since 1 January 2019, under Article 7 paragraph 3 letter b of the VATA, for businesses making a minimum annual turnover of CHF 100,000 from tax-exempt imports of low value consignments, the place of such supplies has changed and is now on Swiss territory, resulting in a tax liability for these businesses and the taxation of these supplies (at the domestic tax rate).
In order to be able to tax a larger proportion of these sales, the digital platforms on which these sellers operate will also be involved in the collection of VAT on these sales as of 1 January, 2025.
