Switzerland: Ongoing Developments In The Area Of VAT, April 2007
Keeping You Up-to-date

In this period of reform, it is difficult to maintain an overview of the VAT reorganization. Our newsletter will keep you informed about the latest developments.

On 30 March 2007, the Federal Tax Administration put into effect the practice notices highlighted in grey in the enclosed table. The relevant drafts were changed again. The complete text of the practice announcements can be found (in German only) at: http://www.estv.admin.ch/d/mwst/dokumentation/praxis/index

Reduced flat rates of 0.8% and 0.4% will now apply to the calculation of the personal portion.

Accordingly, 0.8% of the purchase price (excl. VAT) of the vehicle is taxable, if there was the right to claim an input tax deduction when the vehicle was purchased, or 0.4% if there was no right to claim this deduction when the vehicle was purchased.

However, if the lump-sum calculation results in less than CHF 150.00, the amount of CHF 150.00 per month is to be taxed for the personal portion, as was the previous practice.

The flat rate for breakfast continues to be CHF 3.00, with the flat rate for lunch now being CHF 8.00 and dinner, CHF 7.00. Consequently, this results in the amount of CHF 18.00 per person per day for meals for a full day.

As of 1 January 2007, any free SBB general or specific route passes or SBB half-price rail cards issued to employees (to visit clients, carry out installations, service work, purchase goods, etc., for example) who use them from time to time for personal purposes are not taxable either as a service or when used for personal purposes. For this, the input tax deduction can be claimed for the purpose of the taxable activity.

As of 1 January 2007, all costs for the personal use of work tools (such as "business" cell phones or laptops) are no longer taxable if they are not charged to the employee. However, the input tax credit can still be claimed for the purpose of taxable activity.

Any fees paid by employers on behalf of employees for memberships in associations and clubs as well as costs paid to external childcare facilities will be deemed, regardless of the cost, as a merely insignificant expense under value added tax law.

As of 1 January 2007, all costs incurred by private persons who travel with any company owner or employer on business trips will be deemed to be a justified business expense eligible for input tax deduction for the purpose of taxable activity. It is no longer deemed to be personal use.

The Federal Tax Administration dropped the simplification planned in its draft for companies that have vending machines set up in their premises. Companies must thus continue to declare the infrastructure services provided to the installer/operator as sales, and tax them. It remains to be seen how this issue will develop in the future.

In the case of analysis services, the place of the provision of services is now based on the place where the recipient conducts his business activity or has his business premises for which the service is provided (Art. 14(3) of the VAT Act). The principle of the place where the recipient receives the service applies irrespective of whether the analysis service in any particular case is a scientific or actual consultation service.

We will keep you abreast of any new developments and inform you about the status of any procedural changes.

Please review your situation and any practice directive from the federal Tax administration that is of relevance to you. We will gladly provide you with support for your filings to the Federal Tax Administration in order to help you succeed with your application during this transitional phase. Please do not hesitate to contact us should you have any questions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.