Swiss VAT methods compared: effective, net tax rate, flat tax rate
Three ways to settle VAT with the ESTV – which fits which business, and what does it mean for your bookkeeping?
In Switzerland VAT-liable businesses may choose between three accounting methods. The right choice depends on turnover, industry and the bookkeeping effort you are willing to spend.
1. Effective method
The effective method is the default. On the return you declare separately:
- all taxable sales per rate (8.1 % / 2.6 % / 3.8 %),
- the VAT owed,
- the input tax on your purchases.
The amount due is VAT on sales minus input tax on purchases. This method is precise but requires every document to be booked with the correct VAT rate.
2. Net tax rate method (SSS)
Under the net tax rate method you settle turnover with an industry-specific flat rate. The ESTV publishes a net tax rate per industry that already factors in the typical input tax burden. You pay only that rate on your gross turnover – no separate input tax deduction.
Requirements:
- annual turnover incl. VAT at most CHF 5.024 million,
- VAT liability at most CHF 108,000 per year,
- half-yearly filing.
Upside: significantly less bookkeeping. Downside: businesses with many VAT-charged purchases may be better off with the effective method.
3. Flat tax rate method (PSS)
The flat tax rate method is the variant for public bodies, associations and non-profit institutions. It works like the net tax rate method but uses different rates and applies to half-yearly or annual filing.
Which method fits you?
| Method | Effort | Suited for |
|---|---|---|
| Effective | high | businesses with high input tax share |
| Net tax rate | low | SMEs up to CHF 5 m turnover |
| Flat tax rate | low | associations, public bodies |
More on the ESTV form 100 and the electronic filing flow in the next post.