The Swiss real estate market is also extremely interesting for foreign investors. Time and again we read of major takeovers by foreign companies, in particular of commercial properties or shopping centres. And there VAT also plays an important role.
In most cases taxation of the rental income is opted for on these properties, so that the transfer of the property also takes place in the taxable area. Either the purchase price (excluding the value of the land) is subject to VAT or the notification procedure is applicable. This requires the registration of the foreign company. The purchasers have no other assets in Switzerland and the properties are held through foreign companies (domiciled e.g. in Luxembourg). This means that a tax representative has to be appointed, who processes the VAT declarations with the FTA. In addition a security has to be provided, e.g. in the form of a cash deposit, a bank or other guaranty. Up to now we have been able to rely as a rule of thumb for measuring the amount of the security on the net tax claim for one year. For the calculation the appropriate net tax rate could be applied. In an actual case we determined in this way a guarantee amount of several hundred thousand francs. We were therefore absolutely astonished when the FTA informed us that the guarantee amount had been set at CHF 3.5 million.
This several times higher security amount is based on a change in practice by the FTA. It justifies the tightening with several recent cases, in which the FTA sustained heavy VAT losses. The foreign companies sold their properties with the option. The VAT was paid by the purchasers to the seller (and then claimed as input tax). But the seller had not delivered the VAT to the FTA and terminated his last links with Switzerland (e.g. in the form of a bank account).
It is to be expected that in general the FTA will set higher guaranty amounts. Creative ideas are therefore called for as to how securities can be provided at as favourable a cost as possible.