Should you register as a sole proprietorship for VAT if the turnover is below CHF 100,000?

As a sole proprietor in Switzerland, the question often arises whether one should voluntarily register for VAT (MWST), even if the annual turnover is below the statutory threshold of 100,000 CHF. This decision can have significant advantages and disadvantages that need to be carefully considered. In this post, we would like to present some advantages and disadvantages to you.

Advantages of voluntary VAT registration

1. Input tax deduction: The greatest advantage is probably the input tax deduction. This means that you can deduct the VAT you pay on business expenses from your own VAT liability. This can lead to significant savings, especially in the start-up phase, where investments and expenses might be high. ‍
2. Professionalism: The ability to show VAT on your invoices can improve the image of your business in the eyes of business partners and customers. It conveys the impression of an established, trustworthy business.
3. ‍Preparation for growth: By registering, you prepare your business for future growth. You do not have to register in a hurry once your turnover exceeds CHF 100,000 per year, which saves you administrative hassle.

Disadvantages of voluntary VAT registration

1. ‍Administrative effort: With VAT registration comes additional administrative effort. You need to regularly prepare and submit VAT returns, which can take up time and resources. ‍
2. Potential costs: If your sales prices are calculated including VAT, you might find yourself in markets with strong competition where you cannot adjust the prices accordingly without losing your competitiveness.

Conclusion

The decision for or against a voluntary VAT registration should not be made lightly. It depends on various factors such as the specific circumstances of your company, your long-term goals, and the nature of your expenses.

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