VAT Obligation for New Companies: When and How to Register

Hardly any topic causes as much uncertainty for new companies as value added tax: do I have to register immediately? What happens if I exceed the threshold? And is voluntary registration worth it? The good news: the rules are clearer than they seem at first glance. Here is everything you need to know as a founder.

The 100’000-franc threshold

The basic rule is simple: anyone generating at least CHF 100’000 per year in revenue from taxable supplies becomes liable for VAT. Two details are often overlooked:

• What counts is worldwide revenue, not just what you earn in Switzerland. If you make CHF 60’000 in Switzerland and CHF 50’000 abroad, you exceed the threshold.
• The threshold applies per business, regardless of legal form – sole proprietorship, GmbH (Swiss LLC) and AG (Swiss stock corporation) are treated the same.

Below CHF 100’000 you are exempt from the tax obligation. You may then not show VAT on your invoices – but you also cannot reclaim any input tax.

New companies: the forecast is what counts

With a new company, there is naturally no prior-year revenue yet. So the rule is: the forecast decides. If, when you start your business activity, it is foreseeable that you will exceed the CHF 100’000 threshold within the first twelve months, the tax obligation begins immediately with the start of the activity – so you must register from the outset.

If you initially expect less, you are exempt for the time being. But beware: you must monitor your revenue continuously. If it becomes apparent during ongoing operations that you are exceeding the threshold, you become liable for the tax and must report to the Federal Tax Administration (FTA). Anyone who misses this risks back payments covering several years – including default interest.

Practical tip: document your revenue forecast at formation (business plan, quotes, pre-orders). That creates clarity if the FTA asks questions later.

Voluntary registration: often underestimated

Even below CHF 100’000 in revenue, you can voluntarily register for VAT. That sounds like unnecessary bureaucracy, but in many cases it is a financial advantage – because of the input tax deduction: as a VAT-registered business, you reclaim the VAT you yourself pay on purchases, investments and services.

Voluntary registration typically pays off when:

• your customers are businesses (B2B): business customers can deduct the VAT on your invoices themselves as input tax – for them, your VAT is cost-neutral. You gain the input tax deduction without appearing more expensive.
• you invest a lot at the start: laptop, machinery, vehicle, shop fit-out – VAT is charged on all of it. On investments of CHF 50’000, you get back around CHF 4’000 through the input tax deduction (at the 8.1% standard rate).
• you want to appear established to business partners: a VAT number signals a business of a certain size.

Registration is less attractive in pure B2C business with private customers: there, VAT effectively increases your prices by 8.1% – or eats into your margin.

Filing methods: effective or net tax rate

If you are liable for the tax, you choose between two filing methods:

	Effective method	Net tax rate method
Filing	Quarterly	Semi-annually
Input tax deduction	Yes, on an actual basis per receipt	No (included as a flat amount in the rate)
Tax rate	Statutory rates on revenue	Industry-specific flat rate on revenue incl. VAT
Effort	Higher (input tax bookkeeping)	Considerably lower
Worth it for	Investment-heavy businesses, B2B	Service providers with few inputs

• Effective method: you file quarterly, charge VAT on your revenue and deduct the input tax you actually paid. This is more precise and pays off if you buy or invest a lot – but it means more bookkeeping effort.
• Net tax rate method: you file only semi-annually and apply an industry-specific flat rate to your revenue (e.g. considerably below the standard rate, since input tax is factored in as a flat amount). No collecting receipts for the input tax deduction, considerably simpler – but in return you forgo the actual input tax deduction. Its use is tied to revenue and tax limits and must be approved by the FTA.

For many service providers without major purchases, the net tax rate method is the pragmatic choice. Those with high initial investments usually do better with the effective method – a switch is possible later, subject to deadlines.

The current VAT rates

Rate	Amount	Applies to
Standard rate	8.1%	Most goods and services
Reduced rate	2.6%	Food, books, newspapers, medicines
Special rate for accommodation	3.8%	Overnight stays incl. breakfast

How to register

Registration is done online with the FTA (estv.admin.ch) and is free of charge. You need your UID (business identification number), which you automatically receive with the commercial register entry – how that works is covered in the article on commercial register filing. Sole proprietorships without a commercial register entry receive the UID with their VAT registration.

After registration, your UID becomes your VAT number with a suffix, in the format CHE-123.456.789 MWST. This number must appear on your invoices.

Invoice requirements

For your customers to deduct input tax, your invoice must contain:

1. Your business’s name and location as entered in the register
2. Your VAT number (CHE number with the MWST suffix)
3. The recipient’s name and location
4. Date or period of the supply
5. Type, subject and scope of the supply
6. The consideration plus the applicable tax rate and tax amount (or the note “incl. VAT”)

Avoiding penalties and back payments

Anyone who fails to register despite being liable for the tax owes the VAT retroactively – the FTA can claim back up to five years, plus default interest. Since you can hardly re-charge the tax to your former customers, you effectively pay it out of your own pocket. In cases of intent, fines come on top. The lesson: monitor your revenue, and when in doubt register early – registration costs nothing, missing it costs a lot.

Conclusion

For a new company, the revenue forecast decides: over CHF 100’000 in twelve months means registering immediately. Below that, voluntary registration is often still worthwhile – especially with B2B business and investments. And when it comes to filing, the net tax rate method makes life easier for many founders.

VAT is just one of many building blocks of company formation. The article GmbH formation: costs gives you an overview of all formation costs. And our provider comparison calculator tells you which formation provider best supports you with registration and administration.