The concept ‘supply of goods’ for purposes of Swiss VAT may be different from what other foreign VAT systems or what according to usual language consider a supply of goods. Namely, a supply of goods will also exist when work on goods has been performed, even if the goods are not changed by the work, but only tested, calibrated, regulated, checked for its function or has been treated in another way. Consequently, when a car or bus or truck, that is matriculated abroad and only temporarily in Switzerland, needs to be repaired during its trip in Switzerland, for purposes of Swiss VAT the repair will be treated as a supply of goods. On foot of the provision about the place of supply of goods (Article 8 Swiss VAT Act) the place of supply of the repair (= supply of goods) will be Switzerland.
Article 23 Par. 1 Swiss VAT Act lays down the rule that a supply is zero rated under the conditions mentioned in the other paragraphs of the Article.
Article 23 Par. 2 No. 1 Swiss VAT Act determines a relief (i.e. zero rate) applies on the supply of goods -other than provided for use or exploitation- that are transported or dispatched directly to abroad.
In Swiss VAT Info No. 4 on Taxable object respectively Swiss Business Sector Info No. 5 on Motor vehicle industry the Swiss tax administration has laid down specific practice rules about supplies involving car repair on vehicles that are matriculated abroad.
- proof of export: in order to be entitled to a zero rated repair, the foreign repaired vehicle needs to be exported to abroad, without being used in Switzerland during the period between the repair and the export. The latter condition about use is considered fulfilled when the vehicle has been exported within 48 hours after the repair. Proof of export means a document issued by the Swiss customs authorities that confirms the export. Experience shows that an import document from an other country is not/often not accepted as proof of export -although for Swiss VAT registered taxable persons such proof is accepted.
- domestic use: one of the conditions for entitlement to the zero rate (under the circumstances mentioned in the previous item) is that the vehicle has not been used in Switzerland during the period between the repair and the export. This condition will be relevant in situations in which the 48-hour rule does not apply. Then the foreign company will only be entitled to Swiss VAT refund when the vehicle has not been used in Switzerland for non-business purposes. Depending the period of time between the repair and export, it may be difficult or practically impossible to proof that the car has not been used for non-business purposes.
- 48-hour rule: in their administrative practice rules the Swiss tax authorities have clarified the condition of direct export for situations in which foreign matriculated vehicles are repaired in Switzerland or in which a vehicle is sold and subsequently exported. Experience shows that the Swiss motor vehicle industry is often not aware of or is often not willing to apply the 48-hour rule. Consequently, foreign (corporate) buyers are not timely informed about the impact of the 48-hour rule for their Swiss VAT refund position in case they are charged Swiss VAT. Generally, the 48-hour rule functions de factor as a trade barrier. Namely, once the vehicle has left Switzerland it is too late to collect the necessary evidence -regardless the evidence of import of the vehicle in the country of import as experience shows. Foreign companies that have seen their Swiss VAT refund claim been rejected on ground of the 48-hour rule could consider action.
- recharging: an important condition for entitlement to Swiss VAT refund is that the foreign company has not made domestic supplies during the period for which refund is claimed. A foreign company that has been charged Swiss VAT in connection with the repair of a vehicle -that is matriculated abroad- in a situation in which the 48-hour rule does not apply, and will only be entitled to Swiss VAT refund when the vehicle has not been used in Switzerland for transport of persons that is recharged. Namely, for those services the place of supply is the place where the transport actually takes place -thus Switzerland for the route within the Swiss territory.
Foreign motor vehicle associations that offer assistance to their members will not be able to claim refund of Swiss VAT paid for roadside assistance within Switzerland when these costs are (fully/partly) recharged to their members and/or third parties.
- car purchase: regularly foreign companies purchase vehicles in Switzerland for purposes of export to abroad. Often Swiss car sellers charge the foreign corporate buyer Swiss VAT, despite the fact that the zero rate for export and possibly also the 48-hour rule applies. When the purchased car is collected by the foreign corporate buyer and driven to abroad, that buyer must make an customs export declaration in order to claim -generally/in practice afterwards- from the Swiss seller the application of the zero rate for export. Otherwise, the entitlement to application of the zero rate for export evaporates and the Swiss tax authorities will refuse a refund of charged Swiss VAT on the vehicle purchase by referring to the 48-hour rule.
The 48-hour rule does not apply when the car is exported to abroad by transporting the vehicle by truck (‘piggyback’).