VAT exemption (< CHF 100,000): should you register voluntarily?
Introduction
Have you just launched your self-employed activity or are you managing a small business with a turnover below CHF 100,000? You are then not obliged to register for VAT in Switzerland. This is known as VAT exemption, a simplified regime that exempts you from charging VAT and submitting quarterly returns.
Yet some entrepreneurs voluntarily choose to register for VAT, even below this threshold. Why give up this administrative simplification? The answer lies in two words: VAT recovery. By registering voluntarily, you can deduct the VAT paid on your business purchases, which can represent a significant financial advantage depending on your activity.
But this decision is not without consequences. Voluntary registration involves administrative obligations, a minimum commitment of three years, and can impact your competitiveness if you work mainly with private individuals. So how do you know if this option is advantageous for you?
This guide analyses the pros and cons of voluntary registration with practical examples including figures. You will discover when this option is relevant and how to calculate your VAT profitability threshold to make an informed decision.
📌 Summary (TL;DR)
VAT exemption exempts businesses below CHF 100,000 turnover from registering for VAT. Voluntary registration allows recovery of VAT on business purchases, which is advantageous for activities with significant investments or B2B clients. However, it imposes administrative obligations, a minimum commitment of three years and can reduce competitiveness with private individuals.
The decision depends on your profile: calculate the amount of recoverable VAT on your purchases and compare it to the administrative constraints and the impact on your prices.
📚 Table of contents
- What is VAT exemption in Switzerland?
- Voluntary registration: how does it work?
- The advantages of voluntary registration
- The disadvantages and constraints to consider
- Practical cases: when is voluntary registration worthwhile?
- How to make the right decision for your business?
- Managing VAT simply with BePaid
What is VAT exemption in Switzerland?
In Switzerland, businesses whose annual turnover remains below CHF 100,000 automatically benefit from VAT exemption. In practical terms, they are not obliged to register with the FTA or charge VAT to their clients.
But this exemption is not a prohibition: you can choose to register voluntarily, even below this threshold. This decision commits your business for at least 1 year and subjects you to the same obligations as a business above the threshold.
To learn more about eligibility conditions and obligations, consult our complete guide on the VAT registration threshold in Switzerland.
Voluntary registration: how does it work?
To register voluntarily, you must submit a registration application to the Federal Tax Administration (FTA). Processing generally takes a few weeks.
Once registered, you receive a VAT number and must comply with the same rules as businesses that are obligatorily registered: periodic VAT returns (quarterly or half-yearly), mandatory information on your invoices, keeping detailed records.
The minimum commitment is 1 year, often extended to 3 years depending on the case. You will not be able to deregister before the end of this period, except in exceptional circumstances.
The advantages of voluntary registration
Voluntary registration offers several potential benefits, particularly if your activity generates significant business purchases or if you work mainly with B2B clients.
These advantages vary greatly depending on your business profile. Here are the three main ones to consider before making your decision.
Recovery of VAT on your business purchases
The main advantage: you can deduct the VAT paid on all your business purchases (equipment, supplies, services, training, travel). This recovery directly improves your cash flow.
The impact is particularly significant for activities requiring substantial investments. For example, if you purchase IT equipment for CHF 5,000 including VAT, you recover approximately CHF 370 in VAT (at the rate of 8.1%).
For a business with CHF 15,000 in annual purchases subject to VAT, this represents a recovery of approximately CHF 1,200 per year. A non-negligible amount that can justify voluntary registration.
Enhanced professional image
Some professional clients prefer to work with businesses registered for VAT. The VAT number on your invoices can be perceived as a sign of credibility and sustainability.
This advantage remains relative, however, and depends heavily on your sector of activity. In some fields (consulting, IT, B2B services), it can play a role. In others, it is completely neutral.
Never register solely for this reason: the real impact on your business development is difficult to measure.
Preparation for growth
Registering voluntarily allows you to anticipate the mandatory crossing of the CHF 100,000 threshold. You gradually put in place the necessary administrative processes, without the pressure of an immediate obligation.
This approach avoids rushing and making mistakes when you reach the threshold. You will have already practised your VAT returns and mastered the formal obligations.
The disadvantages and constraints to consider
Voluntary registration is not without drawbacks. It involves real administrative obligations and can negatively impact your competitiveness depending on your clientele.
Before deciding, carefully weigh these constraints against the potential advantages. For some business profiles, the disadvantages far outweigh the benefits.
Increased administrative burden
Once registered, you must prepare VAT returns quarterly or half-yearly, keep detailed records of all your transactions, and correctly manage the different rates (8.1%, 3.8%, 2.6%).
This administrative burden represents time: several hours per quarter if you manage it yourself, or additional costs if you delegate to a fiduciary (expect CHF 300-600 per year minimum).
The choice of accounting method also influences your workload. To understand the different options, consult our comparison of VAT accounting methods.
Impact on your prices and B2C competitiveness
If you mainly invoice private individuals (B2C), adding VAT increases your prices by 8.1% (standard rate). Your end customers cannot recover this VAT, unlike professional clients.
Practical example: a service invoiced at CHF 1,000 rises to CHF 1,081 including VAT. If your non-registered competitors remain at CHF 1,000, you lose price competitiveness.
You have two options: absorb the VAT in your prices (which reduces your actual margin) or add it (which may drive away price-sensitive customers). Neither is ideal in B2C clientele.
Minimum commitment and cash flow
Registration commits you for a minimum of 1 year, often 3 years depending on the case. Impossible to go back quickly if you realise it was not the right choice.
Another constraint: you must pay the VAT collected to the FTA according to your accounting method, sometimes even before being paid by your clients. This can impact your cash flow, especially with long payment terms.
The choice between declaring based on the invoice or on receipt of payment directly influences this aspect.
Practical cases: when is voluntary registration worthwhile?
The registration decision depends entirely on your specific situation. Here are three typical profiles with examples including figures to help you evaluate your own case.
These scenarios illustrate situations where voluntary registration can be advantageous or, conversely, counterproductive.
Profile 1: Activity with significant investments
Example: A freelance graphic designer invests CHF 15,000 in equipment (computer, professional screen, software, furniture) when launching her activity. She recovers approximately CHF 1,200 in VAT.
Her annual turnover is CHF 60,000 with a high margin (few recurring purchases). Registration is clearly worthwhile in the first year to recover VAT on investments.
Possible strategy: register voluntarily at start-up, recover VAT on initial investments, then deregister after the minimum commitment period if recurring purchases are low. This approach maximises the financial advantage whilst limiting the administrative burden in the long term.
Profile 2: B2B activity with professional clients
Example: An IT consultant only invoices businesses, with an annual turnover of CHF 80,000. His B2B clients recover VAT, so adding 8.1% to his invoices does not increase their actual cost.
He has regular business purchases: training (CHF 3,000/year), travel, IT equipment, software subscriptions. Total: approximately CHF 8,000 in purchases subject to VAT, or CHF 650 recoverable.
Simplified calculation: he collects approximately CHF 6,500 in VAT (on CHF 80,000 turnover) and deducts CHF 650. He pays CHF 5,850 to the FTA, but improves his cash flow by CHF 650 thanks to deductions. Registration is neutral for his clients and advantageous for him.
Profile 3: B2C activity with low margin
Example: A personal coach invoices private individuals, with an annual turnover of CHF 70,000. His business purchases are minimal (mainly working time), approximately CHF 2,000/year, or CHF 160 in recoverable VAT.
If he registers, he must add 8.1% to his rates: a session at CHF 100 rises to CHF 108. His private clients do not recover this VAT and may turn to non-registered competitors who have remained at CHF 100.
Balance sheet: CHF 160 recovered against a potential loss of price-sensitive clients and an increased administrative burden. Voluntary registration is clearly not recommended for this profile. Better to keep VAT exemption and remain competitive.
How to make the right decision for your business?
Each situation is unique. To assess whether voluntary registration is relevant in your case, ask yourself the right questions and make a simple profitability calculation.
This approach will allow you to make an informed decision, based on your actual figures rather than generalities.
Questions to ask yourself before deciding
Before launching, evaluate your situation with these key questions:
- What is the annual amount of your business purchases subject to VAT? The higher it is, the more worthwhile the recovery.
- Are your clients mainly B2B or B2C? Professional clients are neutral towards VAT, private individuals are not.
- Can you increase your prices by 8.1% without losing clients? Honestly evaluate your competitive positioning.
- Do you have the time or resources to manage VAT returns? Allow several hours per quarter or budget for a fiduciary.
- Do you expect to exceed CHF 100,000 soon? Anticipatory registration can then facilitate the transition.
Simple calculation: your VAT profitability threshold
Here is a practical formula to estimate profitability: Recoverable VAT on annual purchases – (administrative cost + impact on sales).
The administrative cost includes either your valued time (for example 5 hours/quarter × your hourly rate), or a fiduciary's fees (CHF 300-600/year minimum). The impact on sales is more difficult to quantify: estimate the number of clients potentially lost due to the price increase.
If the result is positive and significant (at least CHF 500-1,000), registration may be worthwhile. If the result is negative or close to zero, keep VAT exemption. For complex or borderline cases, consult an accountant: professional advice will avoid costly mistakes.
Managing VAT simply with BePaid
Whether you choose voluntary registration or are obliged to do so by exceeding CHF 100,000, BePaid considerably simplifies day-to-day VAT management.
Our platform automatically applies Swiss VAT rates (8.1%, 3.8%, 2.6%) to your invoices according to the nature of your services. Calculation is automatic, mandatory information is generated, and you track collected VAT in real time.
Accounting exports facilitate the preparation of your FTA returns. You thus reduce the administrative burden and the risk of errors, without investing in a complex and expensive accounting solution.
Discover how BePaid manages VAT for you. Transparent pricing: CHF 20/month, with no hidden fees. An accessible solution that saves you time on invoicing so you can focus on your core business.
Voluntary VAT registration below the CHF 100,000 threshold is not a decision to be taken lightly. If you make significant investments or work mainly with B2B clients, recovering VAT on your purchases can generate a significant financial advantage. Conversely, if your activity targets private individuals with tight margins, the administrative burden and the impact on your prices may weigh more heavily than the benefits.
Before deciding, concretely calculate the VAT you could recover on your expenses and compare it to what you would have to pay. Also take into account the time devoted to quarterly returns and the minimum commitment of two years.
Once you have made your choice, managing VAT should not become a headache. BePaid automatically calculates VAT on your invoices, applies the correct rates and allows you to export your returns in a few clicks. Test the platform for free and create your first compliant QR-invoices in a few minutes.
