Hello all!
VAT is a recurring topic on the forum, but have not yet seen a topic on the reverse charge mechanism.
In Switzerland, like in EU countries, there is a so-called reverse charge mechanism where, when you acquire a service from abroad,
- this service is first added to the taxes that need to be paid (field 382 in the Swiss VAT forms) and in turn
- the same VAT amount can be deducted (field 405 in the Swiss VAT forms).
From an accounting perspective, there is both input VAT (field 405) and output VAT (382), so a simple accounting entry would be (assuming an accounts payable invoice for a foreign software subscription like Manager Cloud):
Debit Subscription costs 39 USD
Debit Input VAT 7.7% 3 USD (filling field 405)
Credit Output VAT 7.7% 3 USD (filling field 382)
Credit Accounts payable 39 USD (foreign invoice without VAT)
Most accounting software is not programmed to handle this well and typically, this requires manual adjustments. I was wondering how this is dealt with by yourselves here at the M Forum.
Thank you for your valuable input.