On Switzerland’s 2012 first of August national holiday, the Tax Administration (FTA) published – a whole 2 1/2 years after the Swiss Act on Value Added Tax (MWSTG) entered into force – the updated industry-specific brochure on the flat input tax scheme for banks. And not a single thing has changed. With the exception of wording about the effective date, the brochure is identical with the original one that was valid as of 31.12. 2009.
Most likely the ESTV took so much time because there was disagreement on whether or not the material changes of the VAT law also needed to be taken into account when calculating the bank all-in schemes.
Concretely, the whole matter centres in particular on whether dividend income and realised gains from the sale of participation must be excluded from the calculation. Ever since the revised VAT law entered into force on 1.1.2010, these income flows no longer lead to input tax corrections. However, both the new and old practice for bank all-in schemes have not provided for the exclusion of those gains. If the latter are sizeable, it can mean that the input tax deduction is reduced by several percentage points, even though hardly any input tax was incurred on those revenues.
To date, the FTA has always justified its stance by noting that the bank all-in scheme is an approximative determination and the taxable entity has to accept the disadvantages along with the advantages.
Interesting, but difficult to comprehend, are the explanations about the effective date of this brochure. It essentially entered into force (retroactively) on 1.1.2012. But banks that already in the past – and also going forward – settle their VAT liability via the all-in scheme need not take any action. A changeover from the effective to the all-in bank scheme has to be requested from the ESTV by means of Form 1197, and this within two months’ time subsequent to the publication of the brochure. Any retraction or, as it were, change to the effective scheme needs to be announced in writing by the deadline specified in Art. 72 MWSTG. During the current transition phase, banks can renounce in writing their use of the all-in scheme by 31 August 2012 in order to settle up, retroactive to 1 January 2011, via the effective scheme.
As it is only now definitely known that the FTA will not adapt its practice for calculating the all-in scheme for banks to reflect the provisions of the VAT law, and the fact that dividend income and gains from divestitures can continue to lead to sizeable input tax corrections, it must be possible for banks to retreat from the all-in scheme retroactively to 1.1.2010 and determine the input tax deduction in accordance with the effective method.
Thus the time is ripe for critically examining whether and when you should opt out of the all-in scheme.