New VAT rates will apply throughout Switzerland from January 2024. What impact will the increase have on the day-to-day work of trustees? This blog post provides an overview of what the new VAT rates mean for your trust company.
VAT is an important source of revenue for the state. In September 2022, the Swiss electorate voted on a supplementary financing of the AHV by means of an increase in VAT. It is estimated that this will generate around 12.4 billion in additional revenue for the AHV by 2032. The increase in VAT was approved with 55.1 percent of the vote. The Federal Council has decided that the new VAT will come into force on 1 January 2024. The standard VAT rate will increase from 7.7 to 8.1 per cent, the reduced rate from 2.5 to 2.6 per cent and the special rate for accommodation from 3.7 to 3.8 per cent. These changes affect all businesses and consumers in Switzerland who pay VAT.
This is what the new VAT means for invoicing
What do fiduciary companies have to bear in mind when billing for their services and issuing invoices after the increase in VAT rates? According to the Federal Department of Finance, the decisive factor for how the individual services are to be declared in the invoice is the time or period of the service provision. In the case of periodically provided services such as subscriptions or service packages, the period of the service provision is also decisive. Services provided before 31 December 2023 are subject to the previous VAT rates, services provided from 1 January 2024 are subject to the new tax rates.
If you show several services provided by your trust company in 2023 as well as 2024 on the same invoice, then you should list them separately with the separate tax rate. If you do not want to or cannot do this, you must offset all services with the higher tax rates from 1 January 2024. Partial payments must be offset with the tax rate applicable at the time the service was rendered.
It is advisable to offset or invoice all work already performed as of the end of December 2023 – even if these tasks are not yet completely finished. For contracts already concluded that extend beyond the end of 2023, you should make a written adjustment regarding the VAT rates applicable as of 1 January 2024.
Here’s how you can help SMEs switch to the new VAT rates
Advise your SME customers in good time that they will have to charge the higher VAT on their services from the beginning of 2024. It’s best to give them practical tips on what they need to bear in mind. Changes such as the increase in VAT rates are a good opportunity to show your clients that your fiduciary company can advise them comprehensively and proactively. For example, put together a short guide or checklist of what your clients need to be aware of. Make sure that the documentation is practical and understandable.
This kind of proactive advice could be the future of the fiduciary industry. According to a study by Accounto and Treuhand Suisse, the fiduciary sector is more concerned than ever with developing innovative services and expanding advisory skills. Market observers assume that in the not too distant future only a few SMEs will be willing to pay for the handling of repetitive tasks – which often have a high potential for automation.
What does this transformation of the fiduciary industry mean for your fiduciary business? The support you provide as a fiduciary professional can range from overseeing your client’s accounting, to reporting on key business figures, to full financial management. The advantage of this shift in fiduciary work for SMEs is that they can obtain tailored services from financial experts who are familiar with your business and industry – without paying a high monthly salary for a financial director or CFO position.
With new business models, changing client expectations and the increased emergence of innovative technologies, fiduciary services have become more complex in recent years. In the face of this increasing complexity, smaller trust companies in particular are unlikely to be able to serve all client segments effectively and efficiently in the future. In order to consistently offer the best possible advisory services and benefit from economies of scale, you should focus on the most lucrative and exciting client segments for your trust company. To do this, do a client segmentation. Divide existing and potential clients into groups based on characteristics such as industry, company size, legal form or life cycle phase. Finally, determine which client segments your fiduciary company will serve in the future.
How fiduciary software can make the transition phase easier
Once you have defined the relevant customer groups for your trust company, you should focus on advisory services geared to this target group – for example on topics such as dealing with the increase in VAT. Fiduciary software such as Accounto can simplify the rate change from the previous to the increased VAT rates by simply storing the new tax rates and these will be adopted everywhere by the fiduciary software as of the beginning of 2024.
Outsourcing routine activities such as document extraction, reconciling sub-ledgers or generating reports on company key figures to intuitive fiduciary software also significantly relieves the burden on fiduciary companies and can mitigate the effects of the ongoing shortage of skilled workers. Among other things, trust professionals can concentrate more on providing personal advice to their clients and on developing new services with which their trust company will continue to score points with SMEs in the future.