2025 Partial Revision of the Value Added Tax Act (MWSTG)

The primary focus of the partial VAT revision is on shifting VAT obligations from sellers to e-commerce platforms.

VAT for mail-order companies: the old rules

Before 1st January 2019, Switzerland completely waived import sales tax (VAT) on small shipments with a tax value of CHF 5 or less. This gave foreign online retailers dealing with small consignments a competitive edge over Swiss companies.

In an attempt to correct this imbalance, Switzerland introduced a partial VAT revision in 2019, whereby mail-order companies delivering goods to Switzerland have been required to pay VAT if their turnover from small shipments (those with an import tax of less than CHF 5) exceeds CHF 100,000. However, this measure has proven to have limited impact, as the vast majority of smaller mail-order businesses fall below the turnover threshold.

What are the new VAT rules for e-commerce platforms?

Realizing these limitations, the federal tax authorities put forward the partial revision of the Value Added Tax Act (MWSTG), passed by Parliament in June 2023, into effect on 1st January 2025.

The primary change is that online mail-order platforms will now be regarded as service providers for all transactions they facilitate in Switzerland, regardless of whether they are based domestically or abroad. They must therefore declare and tax all the deliveries of goods that are processed on their platform. In other words, the burden of VAT collection shifts from the individual sellers to the e-commerce platform itself.

The new platform taxation rules apply exclusively to e-commerce platforms facilitating the sale of goods. Platforms that facilitate the rental of goods or the provision of services are not directly subject to these VAT changes. However, they are now obligated to report information to the Federal Tax Administration (FTA) about the annual domestic sales of individuals or entities offering services through their platforms that could trigger VAT liability. This requirement primarily targets sectors like transportation (e.g., taxi or courier services) and accommodation rentals, where the platforms themselves are not regarded as service providers for tax purposes.

VAT revisions in practice: How will Swiss VAT work in e-commerce?

From a practical perspective, these changes mean that all small consignments from abroad are now subjected to VAT when they are sold on mail-order platforms that meet VAT registration thresholds, even if the seller is below the CHF 100,000 threshold. It also means that the responsibility of VAT collection lies with platforms, and no longer the individual sellers.

Here’s how it works in practice:

When an item is sold through an electronic platform, two fictitious transactions are created for VAT purposes: one between the original seller and the platform, and another between the platform and the buyer. If the platform is VAT-registered, the first transaction is either treated as exempt from tax or considered to have occurred abroad, meaning foreign sellers who exclusively engage in such transactions are not subject to any Swiss VAT obligations.

Effectively, from a VAT perspective, platforms are treated as if they purchase items from the seller and then resell them to the buyer, even though the seller remains the actual vendor under civil law. The platform is responsible for charging, collecting, and remitting VAT on the second transaction to the Federal Tax Administration (FTA).

This framework allows tax authorities to treat platforms as intermediaries while still ensuring proper VAT collection on transactions that involve many small or foreign sellers, which might otherwise escape taxation.

Which e-commerce platforms are subject to VAT?

An electronic platform is required to pay VAT in Switzerland if it has annual sales of at least CHF 100,000 from goods and services subject to VAT, either as a Swiss-based platform or by exporting goods and services to Switzerland. The platform’s services are considered to take place in Switzerland if the goods are already located in the country or if a foreign platform generates at least CHF 100,000 annually from small consignments imported into Switzerland.

Platform operators that only perform supporting roles and are not classified as service providers for tax purposes are exempt from platform taxation. This includes operators who do not participate in the ordering process or generate revenue directly linked to the transactions. Additionally, providers solely responsible for payment processing, offering advertising space or services, or redirecting buyers to other platforms are also excluded from these tax obligations.

What are the implications for e-commerce platforms and sellers?

For platforms

E-commerce platforms now shoulder significant compliance responsibilities for VAT collection, including:

• Implementing systems to calculate and charge VAT accurately,
• Correct VAT invoicing to buyers in Switzerland,
• Proper processing of VAT and maintaining detailed records of taxable transactions for tax filing with the FTA,
• Ensuring foreign sellers comply with Swiss VAT rules.

It’s vital for electronic platforms to fully understand and adhere to their obligations, as the FTA can take punitory action on platforms or companies who fail to register for VAT or do not meet their VAT billing and payment requirements. These may include an import ban on the non-compliant deliveries, or in serious cases, the complete destruction of the imported goods.

For sellers

In general, the VAT revisions simplify matters for sellers, as they no longer need to navigate the complexities of Swiss VAT rules themselves. Instead, platforms take on the responsibility for VAT collection and remittance, streamlining operations for sellers.

However, small shipments that were previously exempt from VAT because the seller’s turnover fell below the CHF 100,000 threshold will now be subject to VAT. This change could lead to higher end prices for consumers or force suppliers to lower their own prices to remain competitive, ultimately erasing the competitive advantage these sellers previously enjoyed. Sellers may also face higher costs as platforms pass on compliance-related expenses.

Sellers must take the following action:

• Confirm whether they must still collect VAT on their sales or if the electronic platform will collect the VAT from the domestic buyer,
• Check that the e-commerce platform is indeed subject to the new VAT regime,
• Understand that they are secondarily liable for the VAT owed on their platform sales. This means they should ensure the platform they use follows the new VAT rules, especially by being registered for VAT in Switzerland.