Swiss VAT

Thanks for this brilliant software!

In Switzerland there are two ways of doing VAT accounting:

  • Effective reporting: you have to submit a return every quarter. ( like in Manager now )

  • Reporting using net tax rates: You have to declare your turnover (including the VAT charged to your customers) every six months and multiply it by the net tax rate approved by the Federal Tax Administration (FTA). In this way, input tax is deducted at a flat rate and does not have to be calculated.

source: https://www.ch.ch/en/reporting-value-added-tax/

Example:

  • Quotes are without VAT
  • i sell products + VAT 8% on Invoce
  • Using the Reporting using net tax rates i declare my turnover (including the VAT charged) and pay 3.7% net tax rate approved by the Federal Tax Administration every 6 months.
  • VAT that i have paid to my Suppliers is lost.

The second one is used by most of the small business here and i think they will appreciate Manager if there is any way implemented that.

This is similar to what UK has. When under flat rate tax scheme, there is chargeable tax rate and payable tax rate. So in your case, chargeable tax rate is 8% but payable tax rate is 3.7%.

Manager doesn’t support this scheme when using custom tax codes and we haven’t added Swiss VAT code to handle this case. I’ll probably add the support for this on custom tax code level because it seems like many countries offer this option.

Can you follow up on this next week? Should be added by then.

Hey Lubos

This is the same thing I asked you here: UK VAT flat-rate scheme
So I was wondering if this is implemented - and can also be used for the 6.1% flat rate (not 3.7%).

cheers and thank you!

I made some improvements to custom tax codes and now it’s possible to create a tax code with flat rate tax.

For VAT 8% where rate payable is actually 3.7%, this is the way to create it.

1 Like

Okay, we have a problem. In the tax reporting summary you have summed up under “netto” not the actual netto (which needs to be given as turnover statement to the tax authority), but “brutto” - “brutto”*“flat-tax-rate”. Which is more then the actual “netto”. Can you help?

Can you switch your language preference to English and repeat your question? The software is written in English and translated to other languages by volunteers. Screen shots will also help. The more detail, the better, as no one on the development side is a Swiss tax expert.

I created a flat tax

Invoiced some customer


And the tax summary does not show the correct “net sales” it should be 1’000!

I think there is some confusion, over how the “flat-rate” tax works.
The tax rate I created is correct, as is my invoice. There is no problem.

I charge the customer 8%
Yet I only have to pay 6.1% to my government.

But, I have to pay 6.1% of the 1’000CHF I earned. Which means, that my tax liability should be (you guessed it) 61 CHF (not 65.88 CHF). The error is introduced as you you are calculating 6.1% on 1014.12 as net sales. Which is wrong. Net Sales should be 1000. Tax collected should be 80CHF.

BTW: I created all documents from a new test account, and they all are the same data. Before asking me to make screen-shots. And then acquising me that the tax summary is not generated by my invoice. You could have tested it yourself. I would appreciate also a “thank you” for finding a bug. Not to mention, that we have payed significant more taxes due to this error, and lost real money.

@mklarmann, thanks for pointing out my error on flat rate tax schemes. I did, in fact, try to test your situation. That’s where I got the screen shots I posted. But I didn’t go far enough. I’ve now read all the back postings on this and other topics and see that implementation has changed over time. I now agree that you seem to uncovered a bug, which I could reproduce. So I’ve deleted my incorrect posting, your reply to it (which wouldn’t make sense any more), and am elevating this topic to bug status. @lubos will see it.

No worries. Just to add again: net sales should be 1000, tax collected: 80 and tax liability: 61

I would be happy to receive an update. We have to hand in our taxes end of march. And I really don’t see how I could patch this error manually.

@mklarmann, I’ve discussed implementation of flat rate schemes with @lubos over the last couple days, and now believe there is no bug. The way flat rate schemes are implemented is described near the end of this new Guide on tax codes: https://www.manager.io/guides/best-practices/tax-codes.

For your example, it works like this:

  1. You sell 1000.00 of goods or services subject to 8% VAT.
  2. Invoice to customer shows total due of 1080.00, and Accounts receivable increases by same amount. This is what customer will pay to you. Customer has now paid proper VAT amount on the purchase.
  3. Flat rate scheme calculates 6.1% of total amount, that is, of 1080.00, and posts to Tax payable as tax collected. This amount is 65.88.
  4. Since customer owes and will eventually pay 1080.00, 1000.00 is posted to sales income account. But so is the 14.12 you do not owe as VAT. The government has allowed you to keep this as extra income, so it must be reported.

The reasoning behind such schemes is that VAT payment is reduced, giving you extra income for whatever reason the government had for implementing the scheme. But the difference is income to the business. And if there is an income tax, you will be assessed on that extra income.

As nearly as I can tell from information you have provided, you are paying the correct tax amount.

@Tut please undelete my posts - as this seems confusing!

It is wrong what you say on point 3.

If net sales is 1000, then 6.1% tax on this is 61. Even if you would calculate now the 6.1% on the surplus that I earned in addition (because I did not have to pay tax for it), this would be additional 1.15 (of 19) and not 4.88 as you describe it.

Tax is put on top of 1000. Not 1080!

And in the tax report, income needs to be reported as net sales! Which is also wrong. Please fix this. @lubos

I have checked on this with Swiss Authorities and my statutory auditor. How can I make this more clear? You don’t pay tax on taxes! It even describes so correctly on the initial post up top. I am happy to discuss with @lubos on a side channel to make it clear.

How come? As per https://www.ch.ch/en/reporting-value-added-tax it says you declare your turnover (including the VAT charged to your customers) and multiply it by the net tax rate therefore the tax 6.1% is calculated on amount 1,080.

1,080 * 0.061 = 65.88

So before we get into what Tax Summary shows, let’s settle on what you actually owe tax authority if you issue an invoice for 1,080. Do you agree you’d owe 65.88 in VAT?

I have undeleted the single post of yours that I deleted previously. I have not undeleted my post, which was erroneous.

I respectfully disagree, @mklarmann. In point #3, I was explaining how Manager works. You might not agree that Manager’s implementation is correct for Swiss law. But you cannot dispute that is what the program does, because that is precisely what you have complained about. I explained why it does what it does.

Since @lubos has entered this discussion, I will now stay out of it.

Hi,

There is a few ways to put the flat rate in the accounting but the calculation is the same

Example:

Invoice to customer= 1000+8% Vat
Payment to authorities= 1080*flat rate
…as Lubos explained.

Best

I checked again with our auditor. You are right, and I was wrong. I am sorry. Everything seems to be correctly implemented in manager.io