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Planned amendment of the VAT law on the taxation of e-commerce platforms

The proposed legislation is currently in the consultation phase

Denis Kuschnig
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Since 2019, non-domestic mail order companies that deliver goods to Switzerland are liable to pay VAT if they achieve an annual turnover of at least CHF 100,000 or more from so-called "small consignments". “Small consignments" are consignments for which does not exceed five francs and which are therefore exempt from import tax. are exempt from import tax.

However, it has turned out that a considerable part of consumption remains untaxed, as a large proportion of mail order companies do not fulfil the requirements for tax liability. As of the end of April 2020, only 213 non-domestic mail foreign mail order companies are registered for VAT.

As a result, a new draft law was created, which closes this gap by now considering the platform as the supplier of the goods sold. In consequence, VAT liability will be shifted from the original vendor/producer to the platform. In addition, the Federal Tax Authority “FTA” may order administrative measures against foreign platforms or mail order companies if they have not registered as taxable persons or if they do not properly fulfil their declaration and payment obligations.

The draft proposes exceptions for certain types of platforms for which the registration would require disproportionate administrative burden. This should affect all platforms which are not involved in the ordering process of items, for example those platforms that only offer an online place where sellers can place their offers. In these cases, the negotiation takes place directly between the seller and the buyer - for example, by text message, phone call or physical contact. Also excluded are platforms that exclusively draw attention to goods that are offered for sale on other websites, as well as platforms that exclusively publish advertising. This also includes platforms which provide only links to other websites or platforms or which redirect customers to a website or platform on which they can order the desired items.

Also excluded will be platforms which do not generate any revenue in connection with the deliveries, namely because the services offered are free of charge for the sellers and the buyers. They are financed by advertising and could hardly collect the value added tax that would be due on the on the deliveries.

Finally, businesses that only process payments in connection with the orders on platforms are also excluded, although they would technically be able to collect VAT. This is because they do not have the necessary information on the tax treatment of these transactions. These are primarily credit card organizations and online payment systems.

The proposed legislation is currently in the consultation phase. Even if most interest groups are in favor of the change to the platform taxation, there are likely to be some changes in the final drafting, which will probably take months.