There are various relevant regulations, constitutional articles, laws and ordinances which Swiss companies must get to grips with. And the number is growing all the time. Regulation is always a political issue as it has an impact on the competitiveness of the Swiss economy. According to the World Bank’s ease of doing business ranking, Switzerland occupies 33rd place internationally. In a series of articles, we explain which regulations the companies concerned have to be familiar with. In this article we cover value added tax (VAT), the General Data Protection Regulation (GDPR) and the new universal radio and television fee.
GDPR and VAT etc. are regulations you need to be familiar with in business
Legal provisions and regulations can place a heavy administrative burden on companies. Keeping track of everything is a challenge. In our series of articles on regulations, we outline which regulations companies should be familiar with and the best approach to take.
Value added tax – the basic principles
Value added tax is an indirect tax and is levied by the Federal Tax Administration (FTA). It is a net all-phase tax with input tax deduction. This means that every commercial transaction (every purchase or sale of goods or services) is subject to VAT. The tax is added to the price of the products and services provided in Switzerland and transferred to the government.
As only the value added created in the respective transaction is taxed, input tax is deducted. The input tax is the amount of VAT which a company pays when purchasing its goods and services. Companies authorized to deduct the input tax receive the input tax already paid back from the FTA after registration of the VAT. This means the total value of the goods or service is only taxed once on the VAT return.
Domestic consumption is subject to the tax. Swiss VAT is not levied on deliveries from abroad, but import tax and any duties and additional charges are collected at customs. Services provided abroad are not taxed either. Natural persons and legal entities with annual revenue of over CHF 100,000 are liable for the tax.
In total, three VAT rates apply in Switzerland:
- Normal rate: 7.7 percent
- Reduced rate: 2.5 percent
- Special rate: 3.7 percent
Services in the areas of education, culture, healthcare and the rental or sale of property are completely exempt from the tax.
GDPR – a European regulation that also affects Switzerland
The EU’s new General Data Protection Regulation (GDPR) entered into force in May 2018. While the regulation was introduced in the European Union, the new GDPR applies to both Swiss companies which have a business establishment in the EU, but also to companies headquartered in Switzerland but which operate within the territory of the EU. The new regulation unifies the provisions on the processing of personal data by private companies and public bodies. All information concerning a person who can be identified directly or indirectly is classified as personal data. This might be a first name, a photo, an e-mail address, IP addresses or social media posts.
The new EU data protection law seeks to strengthen the rights of EU citizens with regard to the protection of their personal data. The EU’s GDPR also places greater obligations on companies when processing personal data. For example, this concerns companies operating websites linked to Google Analytics to which users from the EU area also have access.
To ensure GDPR-compliant operation of the website, the persons concerned must now be notified that personal data is being collected and processed by the website operators in the data protection policy. The EU General Data Protection Regulation also requires users to grant companies valid consent to process their personal data.
The new universal radio and television fee
Companies and households will be charged the new universal radio and television fee from 1 January 2019. This new device-independent fee replaces the previous reception fee. A company with annual revenue of over CHF 500,000 now pays a fee of between CHF 365 and CHF 35,590 a year depending on its revenue. The obligation to pay the fee no longer depends on whether there are TV sets or radios in a company, but is instead device-independent and must essentially be paid by every company.
The number of regulations which Swiss companies must be aware of is increasing. Violations can result in financial penalties or even custodial sentences. Companies that are aware of which changes are on the way and keep themselves informed about the latest developments ((LINK article 14)) run less risk of losing track of what is going on.