VAT as a company killer
Can you still navigate through today’s VAT jungle? We will be happy to help you.
Since the replacement of Sales Tax by VAT in 1995, the legal jungle has continued to densify. In the meantime we have already reached the point that even state enterprises have Trouble in understanding VAT and applying it correctly. It is justifiable to ask how normal businesses should understand this thicket of laws. If you have ever had a VAT audit, then you know that the auditors seldom settle without offset. Such set-offs may represent a significant risk of business continuity due to the size of the amounts for the company.
We will show you 5 of the most significant VAT risks to which you have to pay particular attention. These may also apply if you are not VAT registered:
- Purchase of services from abroad
If a VAT-compliant company receives services from abroad, these are taxable and can be reclaimed at the same time as input tax. If a non-VAT-compliant company receives services from abroad, they are liable to pay a fee of CHF 10’000.- without a simultaneous right of recourse.
- Storage of documents
All VAT-relevant documents must be kept for six years (in the case of real estate even 26 years). In particular, the storage of proof of export is essential, since without this, tax-free delivery abroad is forfeited.
- VAT obligation abroad
Even though certain services are not subject to Swiss VAT, they can contain risks. In the case of foreign transactions, it is worthwhile to ascertain whether a tax liability abroad is triggered, for example, by the transactions undertaken.
- Pre-tax cuts / mixed use
Particularly in the case of establishments or associations which generate exempt sales or receive subsidies, the input tax reductions can become a considerable business risk. In particular, if these were accounted for over the last five years. A preliminary clarification is also recommended in this case.
- Business with real estate
For real estate transactions, special caution is always required. The construction for one’s own use, the changes in use or opt-in options should always be clarified beforehand in the context of real estate transactions.
This article is not meant to cause anxiety but rather to raise awareness of certain risks. Frequently, these risks can be significantly reduced by prior clarifications and correctly filed processes.
Marcel Lederer will be happy to advise you on the subject of VAT.