VAT liability: criteria, thresholds and practical implications for Swiss companies

VAT liability is one of the key tax-related topics for companies in Switzerland, particularly when a business grows, changes its structure or expands its scope of activities. Such developments often have not only tax implications but may also require formal adjustments to the company. This article provides a clear and concise overview of VAT liability in Switzerland and highlights its connection with formal changes recorded in the Commercial Register.

Fundamentals of VAT liability

In Switzerland, VAT liability does not depend on the legal form of a company, but on the actual entrepreneurial activity carried out. This principle becomes particularly relevant when a company evolves, for example through an expansion of its corporate purpose, an internal reorganization or the launch of new activities. In addition to tax considerations, such changes often need to be correctly reflected in the Commercial Register.

When an activity is considered entrepreneurial for VAT purposes

For VAT purposes, an activity is generally regarded as entrepreneurial when it:

– is sustainably oriented towards the generation of income, even if no profits are realized initially;
– involves the provision of goods or services in return for consideration;
– is carried out independently and at the company’s own economic risk;
– appears on the market under its own name.

These criteria are relevant both for start-ups in their early stages and for established companies that adapt or expand their business model.

Turnover threshold and commencement of VAT liability

As a rule, a company becomes subject to VAT in Switzerland once it generates taxable worldwide annual turnover exceeding CHF 100,000, calculated on the basis of supplies subject to VAT under the Federal Act on Value Added Tax (Art. 10). Exceeding this threshold requires registration with the Swiss Federal Tax Administration (SFTA).

It is important to note that exceeding this turnover threshold does not automatically lead to a change that must be recorded in the Commercial Register. VAT is a tax obligation, whereas the Commercial Register reflects the legal structure and formal setup of a company. In practice, however, this milestone often coincides with a phase of growth or transformation, making it appropriate to review whether the actual business activities, the company structure and the existing Commercial Register entries are still consistent.

When VAT liability may require changes to the Commercial Register

In practical terms, a review of the Commercial Register entries may be appropriate in the following situations:

1. Change or expansion of the corporate purpose: If business growth results from the introduction of new activities, an expansion of services or the shift of previously ancillary activities to core business, the registered corporate purpose may no longer accurately reflect the company’s economic reality.
2. Reorganization of activities and structure: Sustained growth may lead to changes in internal organization, decision-making processes or signatory powers. Such elements must be consistent with the information recorded in the Commercial Register.
3. Change of legal form: In some cases, reaching a certain scale of operations may prompt a company to consider changing its legal form, for example from a sole proprietorship to a limited liability company (GmbH) or a public limited company (AG). This is not a consequence of VAT liability as such, but a typical step in the structural development of a business.
4. Holding structures and intra-group services: Companies that initially limit their activities to holding participations are generally not subject to VAT. However, if they begin to invoice services to their subsidiaries – such as management, administrative or advisory services – VAT liability may arise. In such cases, the effective business activity also changes and must be appropriately reflected in the Commercial Register.

Exceeding the turnover threshold of CHF 100,000 should therefore be understood as a key moment to review the coherence between actual business activities, company structure and the official entries in the Commercial Register.

Useful links and official sources

For up-to-date and reliable information on VAT and Swiss company law, we recommend consulting the following official sources:

– Swiss Federal Tax Administration (SFTA): VAT
– Swiss SME Portal: how the VAT works
– Federal Office of Justice: Commercial Register

Conclusion: VAT and company structure go hand in hand

VAT liability often indicates that a company is entering a new phase of its development. At such times, tax-related and formal aspects should be considered together. At Hoop we support companies in the handling of changes and amendments in the Commercial Register, providing a consistent formal basis for structured business development.

This blog article does not constitute legal advice and makes no claim to completeness or accuracy. Hoop makes no warranty or liability as to its content. This is excluded to the extent permitted by law. Use is at your own risk. Legal advice is recommended if necessary.