Structure & legal steps

VAT: compulsory and voluntary registration, and pitfalls to avoid

In principle, all companies are subject to VAT, whatever their legal form. But from what turnover? And when is voluntary registration worthwhile? Watch out in particular for the pro rata calculation if you start up during the year.

Who is liable for VAT?

Liability concerns companies carrying out a business activity, provided their worldwide annual turnover exceeds CHF 100,000 a year — or CHF 150,000 for non-profit sports or cultural associations and public-benefit institutions.

Voluntary registration

A company carrying out a business activity can, however, apply to be entered in the VAT register even if its turnover is below CHF 100,000.

Voluntary registration is advantageous for your company if it:

  • works as a subcontractor or service provider for VAT-registered companies,
  • provides most of its services abroad,
  • is not yet generating any turnover, but is entitled to significant input tax deductions.

Watch out if you start during the year!

It is rare to set up a business at the beginning of the year. If you start in July, the amount you must not exceed to avoid VAT registration is not CHF 100,000 but 6/12 of CHF 100,000, i.e. CHF 50,000 by the end of the year.

If you exceed it, you will be registered RETROACTIVELY from the start of your business: you will therefore have to pay VAT on your turnover since you started, even though you will not have charged it to your customers...

A point to watch that you absolutely must include in your first-year financial planning.