Value Added Tax (VAT): What is it?

Value-added tax (VAT) aims to tax the non-business-related final consumption domestically. The standard rate is 8%, the reduced rate is 2.5%, and the special rate is at 3.8%.

Value-added tax is a multi-phase tax

Value-added tax is a so-called net multi-phase tax with input tax deduction. Ultimately, the end consumer always pays the VAT (with the purchase of the product or service) because the companies, which are intermediate in the sale to the end consumer, can claim the input tax deduction. The purpose of VAT is thus also the taxation of non-business-related final consumption domestically.

The tax is levied on services provided domestically by taxable persons for compensation (domestic tax), on the procurement of services from companies based abroad by recipients domestically (import tax), and on the importation of goods (import tax).

Only persons who operate a business are required to pay value-added tax, regardless of legal form, purpose, or profit intention. Additionally, there is a turnover threshold of CHF 100,000, below which one is exempt from the obligation to pay VAT. However, voluntary subjection to VAT is also possible.

There are various services that are exempt from value-added tax, such as services of social assistance, hospital treatment, or the turnover at a flea market. If one still wants to subject oneself to VAT, which results in being able to deduct input taxes, this process is called "opting." Thus, the company voluntarily submits VAT revenues but, in return, also deducts the input taxes. This can be advantageous under certain circumstances.