Platform taxation is one of the main changes that will come into force with the partial revision of the Swiss Value Added Tax Act (VAT Act) on 1 January 2025. In this article, we would like to sensitise you to the potential impact on domestic and foreign online trade – also from the perspective of Swiss and foreign retailers – and to the open questions.
1. What was the actual aim of introducing the platform taxation?
Deliveries from abroad should be treated in the same way as domestic deliveries from a VAT perspective. As a rule, import VAT is already charged when the goods cross the border. However, small consignments whose import tax value does not exceed CHF 5 are exempt from import VAT.¹ The aim of closing this VAT loophole by making mail order companies that generate an annual turnover of more than CHF 100,000 from small consignments liable for VAT has failed. This is because the number of VAT registrations by foreign mail order companies since the introduction of the mail order regulation on 1 January 2019 has remained below expectations. Many small consignments continue to enter Switzerland untaxed.
Taxation should therefore now be ensured via the platforms through which the deliveries of goods are processed.
2. How does platform taxation work?
With the entry into force of the partially revised VAT Act, electronic platforms are deemed to be suppliers of goods that are processed via them, even if they are not a party to the underlying purchase contract under civil law. As a result of this fictitious allocation, there will in future be two supplies of goods via platforms for VAT purposes: A first between the selling party and the platform and a second between the platform and the buyer.
As a result, the platforms are obliged to collect VAT on deliveries of goods that are processed via them and pay it to the Federal Tax Administration – provided they become liable for VAT under the general VAT rules. Accompanying measures such as import bans and the destruction of goods are intended to safeguard taxation. Imports through platforms by means of a simple import VAT declaration in the Swiss VAT return are intended to simplify the processes. Under a new exemption provision, supplies by the traders will be exempt from VAT if the platform involved in the sale is entered in the Swiss VAT register.
3. Consequences for online platforms
Which platforms are affected by the new regulation?
The definition of a platform in Art. 3 let. l no. 1 rev. VAT Act is very broad and includes “electronic interface[s] that enable direct online contact between several persons with the aim of providing a supply or service”. As Art. 20a rev. VAT Acts only qualifies platforms as tax subject for pure deliveries of goods, platform taxation does not yet apply to other supplies for goods (e.g. rental or work on goods) or to services² (e.g. platforms for transport services or streaming supplies).
The taxation consequences apply to both domestic and foreign platforms.
The platform should only be considered a VAT subject if the purchase contract is concluded on it, payment is made via the platform or the platform is in a position to withhold VAT from the seller or customer, the platform can issue an invoice or order confirmation and knows whether the goods will actually be delivered.³
According to the criteria in Art. 20a para. 2 rev. VAT Act, pure display, advertising or offer comparison platforms are not subject to the new platform taxation. Similarly, free marketplaces or platforms that only collect or settle supplier claims are not subject to platform taxation. It is questionable whether purely technical all-in-one solutions⁴ , which enable direct contact between the selling and buying parties but do not appear to the customer, are also considered platforms and therefore VAT subject for the supply transactions processed via them.
It is obvious that platform taxation as envisaged in the revised VAT Act will not only cover online trade from abroad, but also domestic trade, i.e. it goes beyond the original objective.
VAT liability of the platform
Domestic platforms become liable for VAT if they exceed the turnover threshold of CHF 100,000 with the delivery transactions attributable to them and other transactions not exempt from VAT. Foreign platforms, on the other hand, are only subject to VAT under the conditions of the mail order regulation (more than CHF 100,000 turnover from small consignments) or if they are deemed to be an importer on the basis of a declaration of subordination and therefore carry out domestic supplies.
According to the currently published legal bases, taxation gaps may still remain in online trading via foreign platforms.
Conclusion
Platform taxation will apply to supplies for private use (goods of all kinds, including meals) and also to supplies of operating consumables and capital assets. It will therefore not only apply to so-called business-to-consumer (B2C) trade, but apparently also to C2C transactions (e.g. second-hand platforms) as well as cross-border and domestic B2B trade via online platforms in Switzerland and abroad.
From 1 January 2025, the affected platforms must be able to settle the corresponding taxable transactions attributable to them with the FTA respectively the customers and process import and export transactions for customs purposes.
4. Consequences for retailers with online sales
Domestic and foreign traders who sell goods to customers in Switzerland via online platforms must clarify and document whether the platforms in question will be subject to VAT in Switzerland from 1 January 2025. Only in this case will their supplies via these platforms be exempt from VAT in accordance with Art. 23 para. 2 no. 13 of the rev. VAT Act.
From 1 January 2025, traders should be able to separate ‘normal’ domestic deliveries from tax-exempt domestic deliveries via platforms and avoid tax being shown in documents for these exempt supplies.
Foreign suppliers who have a Swiss VAT registration and only deliver via electronic platforms may be able to deregister in future.
Tax exemptions that are linked to the personal characteristics of the selling party (e.g. sale of works of art by authors) could lose their effect when sold via platforms as fictitious suppliers.
In addition to the proof of VAT exemption, additional system and documentation requirements, the subsidiary liability of the retailers for the VAT owed by the platform also poses a challenge (Art. 15 para. 4bis rev. VAT Act). It has an impact on the drafting of contracts with the platforms and on the presentation in the notes to the annual financial statements.
¹ Cf. Art. 1 lit. d of the FDF Ordinance of 2 April 2014 on the tax-exempt import of goods in small quantities, of insignificant value or with a negligible tax amount: the import tax value of CHF 5 corresponds to a delivery with a goods value of CHF 62 for goods subject to the standard VAT rate of 8.1%, or CHF 193 for goods subject to the reduced rate of 2.6%.
² However, cf. motion 23.2012 by Erich Ettlin dated 23.02.23 (adopted by the National Council on 11.12.2023) regarding platform taxation of electronic services.
³ BBl 2021, 45 f.
⁴ Providers for platform hosting, warehouse processing, invoicing, payment processing, etc., see BBl 2021, 38.
Your contact persons, Britta Rehfisch and Olivia Schwarz look forward to hearing from you.
