VAT liability for businesses

The obligation to pay value-added tax for companies exists according to Art. 10 Para. 1 of the Value-Added Tax Act regardless of legal form, purpose, or profit motive. For example, companies that generate less than CHF 100,000 in turnover from taxable services within a year domestically are exempt from this tax obligation.

Value-Added Tax Obligation for Companies

Anyone who operates a business is subject to taxation. However, there are exceptions according to Article 10 Para. 2 of the Value-Added Tax Act (VAT Act). It is often unclear what exactly falls under the term "business". A business is operated by anyone who engages in an activity aimed at the sustainable generation of income from services. This activity is carried out independently and is done under one's own name externally. Sustainable generation of income is understood to mean that the company is designed for a certain duration and proceeds systematically. The focus on generating income is assumed when the income from services provided is a primarily pursued goal of the company. Additionally, a professional or commercial activity must be present. This distinguishes it from hobbies or amateur activities, which are not subject to value-added tax. The appearance externally under one's own name finally forms another criterion for assessing the VAT obligation. Cases characterized as VAT-liable companies include, for example, a sports club that organizes a festival each year and charges admission fees, or individuals who regularly and systematically buy and sell goods via auction platforms. On the other hand, a private individual who sells two cars from their personal collection once, or a person who sells the household contents of their own home, does not qualify as a company.