For a long time annoyance has ruled in the border areas about foreign enterprises, which carry out work in Switzerland in the building and ancillary industries and do not pay VAT on these services. This gives them a competitive advantage over domestic suppliers. This problem led to a motion, which the federal council has now put into effect with a change in the VAT Ordinance.
Specifically, a new Art. 9a VAT Ordinance is being issued, which lays down that only services are supplies in the sense of Article 10 Paragraph 2 lit. b VAT Law. This “artifice” enables the FTA to compel foreign enterprises to have themselves entered in the Swiss VAT Register, with the objective of submitting to VAT their supplies rendered in Switzerland.
In the context of the revision of the VAT Law, which Parliament will discuss in 2015, the tax liability of foreign enterprises will be extended in the law so that in future such enterprises will be subject to tax in Switzerland on their supplies of goods and materials from the first franc.
For the foreign suppliers this change in the VAT Ordinance means that from 1.1.2015 they must expect stricter border controls and be compelled to register themselves. For this they must appoint a tax representative, make a cash deposit or guarantee and submit a quarterly VAT return. However, registration has the consequence that the VAT incurred in Switzerland can be claimed as input tax directly in the return.