Methods and bases of VAT returns

• The effective method: you declare the VAT actually due on the basis of the transactions carried out. Under this method, you must file your VAT returns every 3 months.
• The method based on net tax rates (NTR) and flat tax rates (FTR): you use predetermined rates to calculate the VAT to be declared. Under this method, you must file your VAT returns every 6 months.

It is essential to select the method that best suits your business and to meet the corresponding filing deadlines.

VAT returns: which method should you choose?

Effective accounting method

With this method, you can declare the supplies made during the accounting period while deducting the input tax you have already paid to your suppliers during that same period. It is important to prepare this return every three months, paying the tax due at the same time.

Accounting method based on net tax rates and flat tax rates

This simplified calculation method spares you from having to calculate the tax in advance. You simply multiply your company’s annual turnover, including the VAT collected, by a net tax rate set by the Federal Tax Administration (FTA). This rate is adapted to each line of business and takes into account, on a flat-rate basis, the amounts of input tax deductible beforehand (details of the rates by sector and activity are available on the FTA website).

To use this method, your company must meet the following criteria:

• Annual turnover must not exceed CHF 5'005'000 for taxable supplies.
• The annual amount of tax must not exceed CHF 103'000 for the same period.

If you opt for this method, you will have to file a half-yearly return.

It is crucial to choose this method according to your company’s type of activity, because in some cases the effective method may be more advantageous.

Accounting method based on flat tax rates

This accounting method is reserved for public bodies and related services such as schools, hospitals, associations and foundations.

The switch from the NTR method to the effective method can be made every year. However, you must wait 3 years before switching from the effective method to the net tax rate method.

The switch from the FTR method to the effective method can be made after 3 years, whereas the switch from the effective method to the FTR method can be made after 10 years.

To request this change, you must submit a written notification to the Federal Tax Administration no later than 60 days after the start of the tax period.

VAT return bases: what are the differences?

There are two bases for VAT returns: accounting based on agreed consideration and accounting based on consideration received. It is essential to choose one of them and to keep to it consistently throughout the current tax period.

If you account on the basis of agreed consideration, you must account for the VAT when your customers are invoiced and pay the VAT when the invoices are issued, even if payment is made later.

As for accounting based on consideration received, VAT is due when you receive payment of your customers’ invoices. You must account for the VAT when payment is actually received.

It is crucial to determine which basis best suits your business and to apply it consistently throughout the current tax period.