NEWSLETTER 2022 - 01
ANNUAL VAT FINALISATION
The start of a new year means for companies as well as for their accountants and tax advisors that the old year must be closed in accounting, legal and tax terms. The 4th quarterly VAT return 2021 or 2nd semester return 2021 will be prepared in these weeks and should be submitted by the end of February 2022. However, it is important to note that the VAT reporting obligations for the year 2021 have not yet been completely fulfilled. The taxpayer has to reconcile the entire year for VAT within a so-called finalisation.
What is required for VAT finalisation?
The VAT law provides that the Swiss Federal Tax Administration (SFTA) may request additional documents from the taxable person. This includes, among others, the annual VAT reconciliation, which an auditor usually wants to review first as part of a VAT audit. In addition, with the introduction of the business fee for radio and TV (RTVG), the SFTA attaches even more importance to a correct and complete declaration, since the total turnover declared in box 200 of the VAT returns (minus the fee reductions) is decisive for the calculation of this fee.
The annual reconciliation includes the following two elements:
Turnover reconciliation: The filed VAT declarations must be reconciled with the definite annual financial statements. In particular, it must show how all income is divided into taxable turnover, turnover from supplies exempt from the tax with and without credit as well as turnover from supplies provided abroad. The taxable turnover must also be allocated to the various tax rates.
Input VAT reconciliation: From the reconciliation of the input VAT it must be apparent that the booked input VAT was reconciled with the declared input VAT. This can be documented with the help of input VAT accounts or other records. In addition, it is recommended that a plausibility test of the claimed input VAT is carried out with the bookkeeping. Any input VAT corrections must also be checked within the input VAT reconciliation.
What do taxpayers often forget when finalising?
The VAT Ordinance lists in Article 128 para. 2 several points to be considered in the annual VAT reconciliation, in particular:
Income booked to expense accounts (e.g. subletting, onward invoicing);
Intercompany charges not included in operating turnover;
Sales of operating assets;
Advance payments (benefit vouchers!);
Benefits in money’s worth;
Revenue reductions and bad debt losses.
In general, with regard to turnover, the principle can be followed that every fund flowing into the company must be taken into account somewhere in the VAT declaration - with few exceptions (e.g. payback of a loan).
By when does the finalisation have to be done?
Article 72 para. 1 of the VAT law requires that the taxable person must correct any errors “at the latest in the return for the reporting period in which the 180th day after the end of the relevant business year falls.”
In simpler terms, the following obligations arise based on the above article:
Taxable persons must reconcile their VAT declarations with the annual financial statement (so-called finalisation).
Companies whose year end is December 31, 2021 must correct any ascertained differences with the corrective declaration (form 550 “year-end reconciliation“) by August 31, 2022. Differences in favor of the SFTA must be submitted directly to its bank account. Credits in favor of the taxable person will be refunded.
Companies whose year end is another date in the year, will always have the same time frame of 240 days after financial year end for the VAT finalisation.
If no errors are ascertained in the reconciliation, no additional declaration has to be submitted.
The finalisation deadline has expired and the discrepancies were thus discovered late. - What should be done now?
If the company has not submitted a corrective declaration within that said timeframe, the SFTA assumes that the submitted VAT declarations are complete and correct and that the tax period has been finalized. It is in principle possible from that date on that the company will be penalized due to tax evasion because of incorrect declarations at the expense of the SFTA.
If the taxable company ascertains any errors in the VAT declarations at a later point of time,
it must of course make corrections despite the expiry of the mentioned deadline, as long as
the tax claims for the respective tax period have not become legally valid yet or are time
limited. The correction of prior tax periods qualifies as self-indictment. If the SFTA has not
had any knowledge of the errors yet – even in case of a recurrence – the company will not be prosecuted if it supports the SFTA in establishing the tax payable or refundable and if it
makes a serious effort in the payment of the tax payable.
Of course, we will be happy to assist you with the finalisation of the VAT and/or the declaration of previous differences (self-disclosure) in order to close the past tax years cleanly.
Best regards from your VAT/Customs team
Mónika Molnár Florian Hanslik Anita Machin Jane Jachnow