As per its European neighbours, Switzerland is intensifying its efforts to fight against VAT fraud, especially in the e-commerce industry. Starting from January 2025, new regulations will be implemented with two main objectives: making marketplaces more accountable for the VAT collection and ensuring a level playing field for both local and foreign companies selling in Switzerland. From the beginning of 2025, online platforms will play a key role, as they become liable for VAT on behalf of their vendors. With this change, Switzerland aligns with European initiatives to better address international e-commerce’s challenges and reduce VAT fraud.
How has Switzerland been tackling VAT fraud for years?
This 2025 reform is part of an ongoing effort that began in 2018 to reduce VAT fraud and create a level playing field for local Swiss companies and foreign companies operating in the Swiss market. Before 2018, foreign companies benefited from a simplification that gave them an unfair advantage over Swiss businesses. They could generate sales of up to CHF 100,000 within Switzerland without dealing with VAT obligations. As a result, these transactions were VAT-free, whereas Swiss companies conducting the same transactions were required to charge Swiss VAT.
To address this issue, the Swiss Tax Authorities (FTA) implemented a significant change back in 2018. From that date, VAT obligations were no longer based on sales generated within the Swiss territory but rather on the foreign company’s global sales volume. This change required numerous foreign companies to register for VAT purposes.
In 2019, the Swiss Tax Authorities issued a clarification regarding ‘small consignments,’ defined as goods with a VAT value of less than CHF 5. While these goods are exempt from import VAT, foreign companies may still be subject to tax obligations.
When a foreign company generates sales, from small consignments, exceeding CHF 100,000 in Switzerland, it is required to charge VAT on such sales.
Despite these efforts, many foreign companies continued to disregard the rules and issued invoices without VAT. To address this, the Tax Office decided to tighten the regulations, offering a solution for foreign companies selling through marketplaces while simultaneously improving compliance rates for sales to Swiss consumers.
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How to fully understand this reform’s scope and its implications?
First, it is essential to establish a framework for this new reform. It applies only to companies selling goods through a marketplace. The sale of services, for now, remains excluded.
What is a marketplace defined under Swiss law?
This definition faced significant criticism during the public consultation prior to the reform’s implementation, as the concept of a marketplace was not sufficiently clear. In response, the Swiss Tax Office provided a more detailed definition that aligns closely with the European concept of a deemed supplier. A marketplace is defined as a platform that facilitates transactions between a seller and a Swiss consumer, actively participating in multiple aspects of the transaction, such as order taking and payment. It is important to note that platforms involved in only one aspect of the process, such as payment handling or providing advertising services, are not subject to this reform.
What are the new obligations introduced by this reform?
Once a marketplace falls within the scope of the reform, it will be required to register for VAT purposes as soon as it exceeds the global sales threshold. Additionally, platforms with sales below this threshold may choose to register voluntarily for VAT purposes. This allows them to simplify procedures for sellers and gain access to a growing market without administrative constraints.
Once registered, the marketplace can :
- Act as the importer of record on Customs documents;
- Collect VAT on sales made through the platform, declare it, and remit it to the Tax Authorities on behalf of the initial vendor. The latter, however, remains jointly and severally liable for the tax debt.
In the event of non-compliance with registration, returns, and tax payment obligations, Customs authorities reserve the right to deny entry or even destroy the goods.
What are the implications of this reform for vendors and marketplaces?
Once this new regulation is clearer, it is important to assess its impacts on both sellers and marketplaces.
From the seller’s perspective, it is crucial to identify the sales channel to determine VAT obligations. The risk lies in potentially paying VAT twice: once through the platform and once again through the seller’s Swiss VAT return. Since the seller remains jointly and severally liable for the payment, it is essential to ensure that the marketplace has accounted for these changes and will remit VAT on the seller’s behalf. The seller remains fully liable for VAT on sales made through their own website.
From recent experiences, it is important to highlight that some marketplaces sometimes refuse to act as importer of record and require vendors to register for VAT purposes in Switzerland to handle the clearance process prior to the actual sale. It is the case with Manor, for instance, that contacted its vendors to ask for a Swiss VAT registration number if they wanted to keep using the marketplace’s services. That way, the vendor would handle import Customs clearance and payment of import VAT while the platform will handle VAT on sales. To reclaim the amount of import VAT paid at Customs, the vendor needs a Swiss VAT registration number.
From the marketplace’s perspective, it is crucial to understand these changes to ensure compliance with this new reform. This includes VAT registration, proper configuration to manage import requirements, compliant invoicing on behalf of the seller, and complete VAT remittance.
Contact our VAT experts to ensure your transactions in Switzerland comply with these new obligations, whether you are an e-merchant or a marketplace.
We can assist you with VAT registrations, filing VAT returns, and providing tax representation, ensuring your sales in Switzerland comply with the new regulations.
