All Tour Operators should be located in Switzerland

The reasons for that are not only the nice mountains but also the very favourable VAT system.

Switzerland has implemented a VAT system which generally resembles the principles of the EU VAT system while still not being identical to it. Four major differences between the Swiss and the EU VAT system are of interest for Tour Operators:

• The Swiss VAT system did not implement the special Tour Operator Margin Scheme (“TOMS”), where VAT is hidden in the margin and thus non-recoverable by the recipient
• Swiss VAT charged by hotels, restaurants, etc. to Swiss Tour Operators can be reclaimed
• Tour Operator’s turnover related to supplies of goods and services used and enjoyed outside Switzerland (including the relevant Tour Operator’s margin) is not subject to Swiss VAT

• Swiss VAT does not distinguish between supplies to taxable persons and private individuals.

The above differences present some unique opportunities for the Tour Operators established in Switzerland:

No Swiss VAT is charged for supplies of goods and services (purchased by the Swiss Tour Operators and supplied by them in their own name to their customers), which are used and enjoyed outside Switzerland; such supplies would be hotel accommodations, travel arrangements, restaurant services, various events and other typical tourist services. In addition VAT is not due for the Tour Operators’ margin, related to the above supplies. This applies to supplies to all customers regardless of whether they are private individuals or taxable persons.

As the Swiss Tour Operators are able to deduct VAT charged to them by their Swiss suppliers (e.g. hotel fees, transport arrangements, etc.) no hidden VAT is accumulated, which further reduces the costs of the Travel Operators and their customers. In theory, since they are acquiring services for their taxable supplies, Swiss Tourist Organizers, should be able to reclaim VAT charged to them also in various EU and other countries, as long as this is permitted by the local VAT rules of the respective country.

In addition, on occasions when VAT has to be charged by the Swiss Tour Operators, their customers registered for VAT purposes in Switzerland or many foreign countries can in principle deduct or reclaim VAT charged to them for supplies purchased for business purposes. This decreases the costs of business travel, trainings, seminars, conferences and other business related activities.

Finally, Switzerland also provides an interesting option related to the supplies of all services, which are subject to the general rule. As the general rule is that the place of the supply of services is where the recipient is established (regardless whether the recipient is a taxable person or not), for majority of services (including among others consulting fees, finders fees, membership fees, data processing fees) this will result in Swiss VAT not being charged to the customer established or living outside Switzerland – even in case if this customer is a private individual. This further reduces costs of other services (which are in principle not subject to TOMS in the EU) offered by the Swiss established companies to private individuals outside Switzerland.

All of the above applies also to the supplies made by the Event Organizers – for example no VAT is due on the margin related to the events taking place outside Switzerland. Furthermore, if Swiss VAT is charged for events taking place in Switzerland then the customers registered for VAT purposes can in principle reclaim VAT for business related purchases.

For further questions please contact thomas.arnet@ch.pwc.com. Thomas is director in the Basel office of pwc (+41 58 792 4332) and responsible for the tourism sector.