Refund of Swiss VAT (Value Added Tax)

for U.S. domiciled businesses and U.S. resident businessmen
 

In general
 

In Switzerland, a 7.6 % Value Added Tax (VAT) is levied on the purchase of goods and services. This tax also applies to U.S. residents traveling to Switzerland for business purposes and who purchase services, such as accommodation, meals, rent of office facilities, telecommunication, transportation such as train, taxis, car rentals etc.

Under a set of specific rules, U.S. residents or U.S.-domiciled businesses may request a refund of Swiss VAT incurred for business purposes.

Refunds can only be claimed by an "agent" who is domiciled in Switzerland.
 

Eligibility for Refund
 

A foreign business enterprise or businessman may apply for refund of Swiss VAT paid on goods imported into Switzerland, as well as on goods or services purchased in Switzerland provided that

  • the person’s residence or business domicile is abroad;
  • the person does not sell goods or services in Switzerland, and
  • the person can prove that he/she qualifies as a business enterprise in the country of residence or the domicile of the business. VAT for which refund is claimed must have been incurred for the purpose of business.
     

What is refunded and when
 

Refund is granted if goods and services on which VAT was paid serve to make sales which in Switzerland would be subject to VAT.

  • VAT is reimbursed only if the refundable VAT amounts to at least CHF 500 within a calendar year.
  • With respect to the general tax rate of 7.6%, the minimum amount of refundable input VAT is realized when the purchase of goods and services exceeds the amount of CHF 7,700 in a given calendar year.
  • This amount is higher when the reduced rate of 3.6% for hotel accommodation applies.
  • Applications for refund shall be submitted within six months after completion of the calendar year in which goods or services were purchased.
  • Refund is limited to VAT incurred in connection with business.
     

Application for Refund - Procedures
 

The application for refund must be filed with the Federal Tax Administration within six months after completion of the calendar year for which refund of paid taxes is requested. The application must be submitted in French, German or Italian language on the appropriate official form (Form 1223). It must be supported with the required documentation.

The documentation must include

a.) originals of all invoices which must meet the formal requirements as set forth in Art. 28 VAT Ordinance, i.e.
(i) name, address and VAT registration number of the supplier,
(ii) name and address of the purchaser,

(iii)

(iv)

(v)

(vi)

date of supply,

kind, object and quantity of supply,

consideration for the supply, and

the amount of tax payable or the applicable tax rate;
 
b.) the Swiss Customs;
c.) receipts of payment, evidencing that the VAT shown on the originals of the invoices or import declarations has been paid;
d.) proof of business purpose and foreign residence (described below).


Proof of business purpose
 

Together with the application for refund, documentary evidence must be given that a foreign business enterprise and not a foreign individual or non-commercial entity is requesting the refund.

Generally, such evidence may be given by providing a written confirmation of the foreign VAT authorities comprising a short description of the kind and field of business activities performed abroad and the foreign VAT registration number.

As far as U.S. business enterprises are concerned the documentary evidence is satisfied by submitting a "Certificate for Filing a Tax Return" (Form 6166 or Forms 1020 series) which are issued by the Internal Revenue Service (IRS).
 

Limitations of Refunds

Entertainment, business expenses

For computing the amount of refundable Swiss VAT some further criteria must be taken into account. Refund may be requested for input VAT on goods and services purchased solely for business purposes, i.e., transactions for which a Swiss VAT taxpayer could ask for an input tax deduction. On food and drinks only 50% of input VAT is refundable. VAT paid on pleasure expenses (e.g. night clubs, sailing boats etc.) is not refundable.

An amendment to the Swiss VAT Ordinance provides that the full VAT paid on accommodation, transportation on business trips, the purchase, leasing and rental of passenger cars, and the supplies of goods (fuel) and services for passenger cars may be refunded. This amendment became effective as of January 1, 1996. Before this date, refund or input tax credit for VAT paid on these services was limited to 50%.
Limitations in general

As the supply of certain services does not fall within the scope of Swiss VAT, input tax deductions (for VAT taxpayers) as well as refunds of input tax (for foreign business enterprises) may not be granted on the purchase of goods and services which are used to perform services outside the scope of Swiss VAT.

Among these services are e.g., medical treatment, services supplied by social service and welfare institutions, transactions related to child and youth care institutions, transactions performed by non-profit organizations, cultural services, insurance and reinsurance transactions, a set of capital and monetary transactions and transactions with respect to real estate and lease of real estate.

Therefore, e.g., the employer of a U.S. insurance executive participating in a seminar on risk management in Switzerland may not submit a request for refund of Swiss input VAT on the accommodation cost paid. As the services received (accommodation) are used to perform services outside of the scope of Swiss VAT (insurance) refund of input tax is excluded. Therefore, especially foreign enterprises in the various fields of e.g., medical treatment, welfare and social security, education, insurance and reinsurance, banking, and real estate must verify for which purpose the goods and services purchased in Switzerland are used. In such cases refund of Swiss input tax may be granted only provided that the goods and services purchased in Switzerland are used to perform services which would be subject to VAT when performed in Switzerland.
 

Swiss VAT Agent

The business or person claiming a refund must appoint a Swiss VAT agent. The agent must have a power of attorney on the official form (Form 1222) and must be authorized to represent the foreign business enterprise vis-à-vis the Federal Tax Administration and to collect the refunds.

For any further information please contact the

Swiss Federal Tax Administration
Main division of value added tax
Schwarztorstrasse 50
3003 Bern
Tel. ++ 41 31 322 21 11
Fax: ++ 41 31 325 71 38
 

Acknowledgment

These guidelines courtesy of Walter Boss, Attorney at Law

 

Update January 10, 2007