CHF 100,000 in annual turnover: that is the number in every article about VAT liability. It is correct, but it doesn't answer the questions that matter. When exactly does liability start, which turnover even counts, and what happens if you are late?
We go through the threshold, show which income counts and which doesn't, when voluntary registration pays off and how registering works. Plus the mistake that costs the most: showing VAT before you are registered.
Three conditions before the numbers matter
Before any turnover threshold becomes relevant, your business has to meet three conditions. According to the FTA, a business domiciled in Switzerland is generally liable if it independently carries on a professional or commercial activity, appears externally under its own name, and is aimed at generating income from supplies on a sustained basis.
The legal form is irrelevant. Sole proprietorship, GmbH or AG: what counts for VAT liability is turnover, not the corporate wrapper.
The threshold: 100,000, but not for everyone
The general threshold is CHF 100,000 in turnover from supplies in Switzerland and abroad that are not exempt without credit. Alongside it, the FTA lists different limits, on a page available in German:
- Non-profit, volunteer-run sports or cultural associations: at least CHF 250,000.
- Charitable institutions: at least CHF 250,000.
- Public-law institutions: at least CHF 100,000 from taxable supplies to non-public bodies.
- One-off sports, cultural or festival events: at least CHF 100,000 in budgeted taxable income, for instance from catering, sales stands, advertising or sponsoring.
The CHF 250,000 limit for associations is regularly overlooked. Anyone running a volunteer-led sports club has considerably more room than a business does.
Which turnover counts and which doesn't
This is where most misjudgements happen. What counts is consideration from taxable supplies of goods and services in Switzerland, from supplies abroad that would be taxable if made in Switzerland, and from supplies in Switzerland that are exempt with credit.
What does not count is consideration for supplies exempt without credit in Switzerland, consideration for foreign supplies that would be exempt without credit here, income not received in return for a supply, meaning so-called non-consideration under Art. 18 para. 2 of the VAT Act such as donations or subsidies, and income from the non-business sphere.
The difference between «exempt with credit» and «exempt without credit» is decisive and constantly confused: supplies exempt with credit, such as exports, count toward the threshold. Supplies exempt without credit, such as many services in education or healthcare, do not. A physiotherapist mainly providing exempt medical treatment can therefore be well past CHF 100,000 in turnover and still not be liable for VAT.
When liability begins
The timing depends on whether you are just starting or have been going for a while.
Swiss businesses that newly take up an activity, or expand it by taking over a business or opening a new branch of activity, become liable when they take up that activity, if the circumstances suggest the relevant threshold will be reached within the following twelve months. What matters is the forecast, not the turnover actually achieved.
Existing businesses that were previously exempt become liable after the end of the financial year in which the relevant threshold is reached.
In practice: if you start with a business plan projecting CHF 150,000 in the first year, you are liable from day one. If you start small and first cross the threshold in year three, you become liable from the following year. Keep an eye on your rolling twelve-month turnover rather than just the calendar year.
Registering: process and deadline
Registration is done online with the FTA. Under Art. 66 para. 1 of the VAT Act you have to register within 30 days of the start of tax liability, without being asked to. The self-declaration principle applies here too: nobody writes to you.
Only supplies that are not exempt without credit count. Donations, subsidies and exempt supplies stay out.
The FTA provides an online questionnaire that clarifies liability and triggers the registration.
Effective method or net tax rate, and with it quarterly or half-yearly filing. This choice affects both effort and tax burden.
Only with a VAT number may you show the tax on invoices. From then on the number and rate belong on every invoice.
The questionnaire and all registration details are on the FTA's registration page, in German. Which accounting method suits you is covered in the article on the net tax rate versus the effective method.
The costliest mistake: showing VAT without being registered
This happens more often than you would think: a template from the internet contains a VAT line, or someone copies a colleague's invoice layout. The amount shown becomes payable without you being able to deduct input tax in return. So check your invoice template before you issue the first invoice, not at the first audit.
Voluntary registration: when it pays off
Businesses that do not reach the thresholds can still register voluntarily. The FTA notes that voluntary liability is possible at the earliest from the beginning of a current tax period.
Two situations argue for it. First, high investments or input costs: only registered businesses can deduct input tax on machinery, vehicles, software or fit-outs. In a build-up phase with high spending and low income this regularly produces an input tax surplus, which the FTA pays out. Second, a purely B2B customer base: if your customers are themselves liable for VAT, they deduct the tax as input tax. It is cost-neutral for them, so your price effectively stays the same.
What argues against it is selling to private customers. There, VAT raises the final price directly, because private individuals cannot deduct input tax. If you mainly sell to consumers and have few input costs, you are making your offer more expensive and taking on extra administration.
One note for later: businesses using net tax rates or flat tax rates cannot opt to tax supplies that are exempt without credit. If opting matters to you, that affects your choice of accounting method.
And back out again: deregistration
Liability ends when the business activity ends or, in the case of asset liquidation, when the liquidation is completed. In both cases you have to deregister with the FTA in writing within 30 days.
If your relevant turnover falls below CHF 100,000 and it is expected that it will not be reached in the following tax period either, you can be released from liability and deleted from the VAT register. Deregistration is possible at the earliest at the end of the tax period in which the threshold was first not reached, and has to reach the FTA within 60 days of the end of that tax period. Important: not deregistering counts as waiving the exemption, so you remain liable. The details are on the FTA's deregistration page, in German.
Keeping an eye on turnover with Infinity
Nobody misses VAT liability on purpose. It happens because the figures only come together at the annual closing. Continuous bookkeeping solves exactly that: with Infinity, the Swiss AI accounting, you connect your bank account, confirm AI booking suggestions in real time and see your accumulated turnover in the income statement at any time, instead of reconstructing it once a year.
Once registered, you issue invoices in Infinity with the statutory rates and your VAT number. How filing works after that is covered in the article on VAT deadlines and the FTA portal, and the fundamentals are in our guide to VAT for the self-employed.
Frequently asked questions about VAT liability
From when am I liable for VAT?
From CHF 100,000 in turnover from supplies that are not exempt without credit. New businesses become liable as soon as they take up the activity, if it is foreseeable that the threshold will be reached within the following twelve months.
Do donations and subsidies count toward the threshold?
No. Income not received in return for a supply counts as non-consideration under Art. 18 para. 2 of the VAT Act and does not count toward the threshold. The same applies to supplies that are exempt without credit.
Which threshold applies to associations?
For non-profit, volunteer-run sports and cultural associations, and for charitable institutions, the threshold is CHF 250,000 instead of CHF 100,000.
How long do I have to register?
Under Art. 66 para. 1 of the VAT Act, within 30 days of the start of tax liability, and without being asked to. Registration runs online through the FTA questionnaire.
May I show VAT before I am registered?
No. Anyone showing VAT without being entitled to owes the amount shown to the FTA (Art. 27 of the VAT Act). Check your invoice template before issuing the first invoice.
See the threshold before it reaches you
VAT liability is not a risk when you know your figures. With Infinity you see your running turnover at any time, notice in good time when the threshold is approaching, and issue correct invoices with your VAT number once registered.
Try Infinity free for 14 days, no credit card required. More on the page for small businesses and the self-employed.
