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Regulation for the mail-order trade as of 1 January 2019

Change in regulation as of 1 January 2019 for annual sales of at least CHF 100,000 from small consignments

Denis Kuschnig
17/09/2018
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The new rules for the mail-order trade are intended to eliminate the competitive advantage of foreign mail-order companies over mail-order companies domiciled in Switzerland.

This competition advantage is a result that no VAT is charged on imports of goods, if the tax amount is five francs or less (so-called small consignments). In addition, the delivery of goods is not subject to domestic VAT, since it is not a domestic delivery. The buyer can therefore purchase small consignments from abroad without VAT, whereas the same consignment is subject to domestic tax when purchased from a domestic supplier liable for VAT.

Change in regulation as of 1 January 2019 for annual sales of at least CHF 100,000 from small consignments

If a mail-order company reaches a turnover of at least CHF 100,000 per year deriving from small consignments, delivered from abroad to Switzerland, all its deliveries from abroad to Switzerland are newly regarded as domestic deliveries. As a result, the mail-order company becomes mandatory liable for Swiss VAT must be registered in the VAT register. Thus all deliveries within or to Switzerland of the taxable mail-order company are subject to domestic VAT. This means that the supplier must invoice VAT for all his deliveries to Switzerland.

In the following, the consequences of registering as a mail-order company are summarized again using a practical example:

  • Shipment from abroad to Switzerland
  • Import tax is charged if the CHF 5 limit is exceeded. The importer is the mail-order company; any import tax will be charged to him. The importer can reclaim the import tax within the scope of his business activity which entitles him to deduct input tax by filing his VAT return.
  • After import clearance, the goods are delivered to the customer in Switzerland. The mail-order company invoices the delivery with domestic VAT to the recipient and has declared the sale in the VAT return. This is independent of whether import tax was charged or not (based on the CHF 5 limit).

Tax liability and registration

If during 2018, a company reaches a turnover of at least CHF 100,000 from small consignments and based on forecast assumption, it will reach this threshold also in 2019, the company is liable to Swiss VAT from 1 January 2019 and must be registered in the VAT register.

If a mail-order company starts its activities in connection with Switzerland after 1 January 2019, all its transport and dispatch deliveries are considered as delivered in Switzerland as soon as it reaches the annual turnover limit of CHF 100,000 for such small consignments.

As a result of his registration, the foreign mail-order company must have a tax agent in Switzerland and must also provide a qualified guarantee in favor of the Swiss Confederation.

Voluntary tax liability according to “Foreign subordination declaration“

Mail-order companies can voluntarily apply to be subject to the tax liability on the basis of a "foreign subordination declaration" even before reaching the turnover limit or before the new regulation comes into force. This makes it easier for them to plan the changeover.

With the "Foreign subordination declaration", the place of delivery is shifted to Switzerland, analogous to the mail-order regulation. The supplier is regarded as the importer and can claim the import tax as input tax. The delivery to the domestic buyer shall subsequently be considered to as a domestic delivery. The application of the "foreign subordination declaration" can also make sense if the turnover deriving from small consignments is close to the turnover limit of CHF 100,000. This subordination ensures continuity in terms of expiration and tax liability.

 

Contact

Raphael Gaudin
Raphael Gaudin
Certified Fiduciary, MAS UAS in Fiduciary and Consulting, Partner
Curator & Horwath AG
Hansjürg Szadrowsky
Hansjürg Szadrowsky
Certified Tax Expert, Partner
Curator & Horwath AG