Installation Supplies vs. Ancillary Supplies To Carriage/Shipping

Author:Ms Anita Machin and Florian Hanslik
Profession:PrimeTax AG

A foreign company supplies and installs a machine in Switzerland. According to past practices of the Swiss Federal Tax Administration (SFTA), this process undeniably qualified as a work contract for supply. The new practice of the SFTA now leaves room for speculation and opens another field of activity to consultants.

In carriage and shipping, the place of supply is where the carriage or shipping of the object to the buyer (or to a third person on the buyer's behalf) begins. If a good is imported into Switzerland from abroad, the place of supply is outside of Switzerland in principle. The corresponding turnover is not included in determining the liability for VAT in Switzerland and does not trigger the tax liability.

Supplies of moveable or immovable goods that are newly produced or processed before the actual delivery are generally qualified as work contracts for supply. Processing shall also include all work which doesn't change the good, especially function checks, cleaning, service work, maintenance, etc. For qualification as a work contract for supply, it is also not necessary that material is used, replaced or added to the good. If a good is imported into Switzerland from abroad and processed before delivery, the place of performance is Switzerland. The turnover thus created is relevant for determining VAT liability in Switzerland. If the foreign supplier exceeds the turnover threshold of (worldwide) CHF 100,000, VAT liability becomes mandatory for him in Switzerland.

New practice of the SFTA

According to the practice published by the SFTA, assembly services or installations can qualify as ancillary services to carriage/shipping under certain conditions. If a foreign company delivers a good into Switzerland, the place of performance is still considered to be located abroad when the associated (ancillary) assembly or installation supply can be qualified as an ancillary supply to the delivery. This means that the foreign company does not become obligatorily subject to VAT in Switzerland through such supplies, even though the assembly/installation takes place in Switzerland.

What does this mean for my company?

As soon as an individual adaptation is undertaken at the location of the recipient, "ancillary supply" is no longer applicable. However, the definition and qualification are not always straightforward in the individual case and/or can necessitate discussions with...

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