VAT: would the net tax rate method save you time?
Two VAT returns a year instead of four, and almost no input tax to track: the net tax rate method suits many small businesses — but not all of them.
A VAT-registered business has a choice between two accounting methods. The choice is made rarely, it binds you for several years, and it changes a great deal day to day.
The effective method
You charge VAT to your clients, you reclaim the VAT your suppliers charge you, and you pay the difference. Quarterly returns.
It is the most accurate method: you reclaim the VAT on every purchase. It is also the most demanding, because input tax has to be tracked on every invoice received.
The flat-rate method (net tax rate)
You charge VAT to your clients as usual, but you pay the Confederation a flat percentage of your turnover, specific to your industry. In return, you no longer reclaim VAT on your purchases — it is deemed to be included in the flat rate. Half-yearly returns.
Two returns a year instead of four, and no more tracking of input tax: the time saved is considerable.
Who can choose it
Two conditions, both of which must be met: annual turnover not exceeding 5.024 million francs including VAT, and tax due not exceeding 108,000 francs a year. Lower ceilings apply depending on the rate granted to your industry.
How to decide
The rule is easy to state: the more of your costs carry VAT, the less attractive the flat rate is.
A tradesperson who buys a lot of materials is better off reclaiming VAT under the effective method. A consultant, a services firm, a hairdresser — whose main costs are wages and rent, outside the scope of VAT — often gain from the flat rate, in money as well as time.
In between, it has to be calculated. One full financial year is enough to settle it.
We do the calculation on your real figures
We take your last financial year and compare the two methods, franc for franc, before advising you.
Estimate your accounting costs online, or call us on +41 26 303 36 69.