The Swiss Value Added Tax Law gives companies the option to choose between two types of accounting (agreed/received) and three accounting methods (actual, balance rate, lump-sum taxation). We will show you the differences.

In principle, every company active in Switzerland with more than CHF 100,000 in annual sales is liable for value added tax – regardless of its legal form. However, there are exceptions. Taxpayers are free to choose how they account for VAT. Three accounting methods, each combinable with two types of accounting, are available.

1. The type of accounting: Agreed or received

Companies can freely decide whether to account for value-added tax with the Federal Tax Administration (ESTV) based on "agreed" or "received" payments.

For VAT accounting based on agreed payments, the date of invoicing is decisive, meaning that VAT becomes due with the invoice to the customer. Similarly, input tax on expenses and investments can be deducted as of the date of the supplier's invoice. VAT accounting based on agreed amounts is the standard method accepted by the ESTV. Most VAT-liable companies settle quarterly based on agreed payments, as this accounting type provides day-to-day figures. It requires accounts payable and receivable management. Note: VAT is due upon invoicing and must be pre-financed – even if the corresponding payment is delayed or does not arrive at all. Returns, payment defaults, customer credit losses, and discount deductions must be corrected subsequently. In the case of final debtor losses, the VAT can be reclaimed with the next settlement. With VAT accounting based on received payments, the moment of payment of a customer or supplier invoice is relevant for the due date of VAT. This means that income and expenses are only declared when the respective payments are actually made or spent. According to the Value Added Tax Law, this accounting type is also possible if subsidiary books for debtors and creditors are kept. Nevertheless, it is mainly used by very small businesses that only book based on cash flows. The accounting based on received payments must be applied for approval with a separate form from the ESTV. Important: The tax amount payable is the same for both accounting types – it is only due at different times. Once an accounting type is chosen, it must be maintained for at least one tax period.

2. Accounting method: Actual, balance rate, or flat rate taxation

Besides the two types of accounting, three accounting methods are available for VAT accounting. With actual taxation, the turnover, divided according to the statutory tax rates, is declared, with the owed VAT and input tax shown separately. The settlement (agreed or received) is done quarterly. The actual method provides precise figures and thus absolutely correct tax amounts. It also requires accounting with separate recording of VAT and input taxes. With the balance tax rate method (BTR), the company delivers a certain percentage of its VAT-liable turnover to the ESTV. For this, the VAT-liable turnover (agreed or received) is multiplied by a balance tax rate (BTR) allocated by the ESTV. This rate varies from industry to industry and is based on experience. Input tax is not recorded separately in the BTR method. The BTR method simplifies accounting, as the input tax does not need to be recorded separately. Additionally, VAT must only be settled biannually when using the BTR method. However, the simplified calculation is also its biggest disadvantage. This can lead to a higher tax liability than the actual method. Moreover, the BTR method can only be applied by companies that meet two conditions: Firstly, they may generate a maximum of CHF 5.005 million in annual turnover from taxable services. Secondly, the tax owed during the same period must not exceed CHF 103,000, calculated with the relevant balance tax rate.

A flat-rate taxation is only possible for VAT-liable public bodies (federal government, cantons, municipalities) and related institutions (e.g., churches, private schools and hospitals, public transport operators), associations, and foundations. It closely resembles the BTR method but has no turnover and tax liability limits, and the turnover (agreed or received) is not declared semi-annually, but quarterly.

3. Correction Accounting and Annual Reconciliation

Special correction forms are available for adjustments to individual VAT settlements during a tax period, as well as for errors identified during the annual close. Important: In these cases, there are two different forms (download from ESTV's website): One for taxpayers who account using the actual method, and another for those who use the BTR or flat-rate method.

VAT Settlement with Sage and Findea

Success in VAT accounting is easy with Sage's accounting software. With Sage Start, small businesses and start-ups can account for VAT in a guided process and file electronically directly with the ESTV. Balancing VAT accounts requires just the push of a button. At the same time, a voucher for the e-banking payment of the owed VAT to the ESTV is created. You are welcome to seek advice from the trust company Findea if you have difficulties with VAT issues. Findea has 11 locations in Switzerland – certainly also near you.

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