VAT IS Value Added Tax

The value added tax (VAT) is a general consumption tax paid by the final consumer. Indeed, consumers pay VAT through the purchase of goods (clothes, cars, food, etc..) And services (haircuts, transportation, restaurant meals, etc..). It is perceived only by the federal government and used to cover general state. A company must include the tax on value added in the price of services provided and products sold in the country and pay the Confederation. In return, it may deduct from this amount the input tax paid as part of its business.

These include:

domestic tax on the invoice issued (at all stages of production / distribution and service companies in Switzerland);

acquisition tax declared by the company (services provided by companies based abroad);

the import tax (when importing objects).

VAT rates are applied as follows (state 2011):

in normal cases: 8.0% of sales;

for the accommodation sector (special rate for the provision of accommodation, including breakfast): 3.8%;

food and soft drinks, books, newspapers and magazines, medicines and access to sporting and cultural events are for the benefit of a reduced rate of 2.5% (consumer goods).

Changes result in higher rates of VAT on 1 January 2011

Deduction of input tax

For goods and services that go directly to the consumer, the tax on added value shall be entered but must be understood especially in the final price. This does not apply to business relationships: it usually works with net price plus the value added tax.

In this context, the principle of deduction of input tax plays an important role: as, during its transformation from raw material to finished product, a commodity passes through several stages where value added is taxed each time, at each stage , the creator of value may deduct the amount of tax previously paid value-added stage.