Our client is subject to balance tax. Does he have to pay sales tax when exchanging a vehicle?
March 13, 2025
Tax law
Yes, your client must pay value-added tax when exchanging a vehicle. According to
Art. 18 para. 1 VAT Act
, services provided by taxable persons for remuneration within the country are subject to domestic tax, unless the law provides for an exception (
Art. 18 para. 1 VAT Act
). Since the vehicle exchange represents a service exchange and thus entails a fee for the provided service, the service is taxable.
Furthermore, it should be noted that under the flat-rate tax method, all fees subject to domestic tax must be recorded, including taxable services (
Art. 127 para. 1 VAT Ordinance
). Since a vehicle exchange is considered a paid service for tax purposes, this fee must be taken into account accordingly.
In summary, this means that the exchange of a business vehicle is, from a tax perspective, equivalent to a sale, for which value-added tax must also be paid.
Sources
Federal Act of June 12, 2009, on Value Added Tax (Value Added Tax Act, VATG) > 2. Title: Domestic Tax > 3. Chapter: Tax Base and Tax Rates > Tax Base
Art. 24 para. 1 VATG
1 The tax is calculated on the actual consideration received. The consideration includes, in particular, the reimbursement of all costs, even if they are billed separately, as well as the public-law charges owed by the taxable person. Subsections 2 and 6 remain reserved.
Art. 24 para. 3 VATG
3 In the case of exchange relationships, the market value of each service is considered the consideration for the other service.
Art. 24 para. 2 VATG
2 For services rendered to closely related persons (Art. 3 lit. h), the consideration is the value that would be agreed upon between independent third parties.
Art. 24 para. 4 VATG
4 In the case of exchange repairs, the consideration includes only the wages for the work performed.
Art. 24 para. 5 VATG
5 For services rendered in lieu of payment, the consideration is the amount that is compensated thereby.
Art. 24 para. 5bis VATG
5bis If a person is considered a service provider under Article 20a, the consideration for the delivery they facilitated corresponds to the value they communicated to the purchaser of the item.
Art. 24 para. 6 VATG
6 The following shall not be included in the tax base:a. Ticket taxes, property transfer taxes, and the value-added tax due on the service itself; b. Amounts received by the taxable person from the person receiving the service as reimbursement for expenses incurred on their behalf, provided these are shown separately (pass-through items); c. the portion of the consideration that pertains to the value of the land when selling an immovable property; d. the cantonal charges included in the price for disposal and supply services to water, wastewater, or waste funds, insofar as these funds make contributions to disposal facilities or waterworks therefrom.
Federal Act of June 12, 2009, on Value Added Tax (Value Added Tax Act, VATG) > 2. Title: Domestic Tax > 3. Chapter: Tax Base and Tax Rates > Tax Base
Art. 24 para. 1 VATG
1 The tax is calculated on the actual consideration received. The consideration includes, in particular, the reimbursement of all costs, even if they are billed separately, as well as the public-law charges owed by the taxable person. Subsections 2 and 6 remain reserved.
Art. 24 para. 3 VATG
3 In the case of exchange relationships, the market value of each service is considered the consideration for the other service.
Art. 24 para. 2 VATG
2 For services rendered to closely related persons (Art. 3 lit. h), the consideration is the value that would be agreed upon between independent third parties.
Art. 24 para. 4 VATG
4 In the case of exchange repairs, the consideration includes only the wages for the work performed.
Art. 24 para. 5 VATG
5 For services rendered in lieu of payment, the consideration is the amount that is compensated thereby.
Art. 24 para. 5bis VATG
5bis If a person is considered a service provider under Article 20a, the consideration for the delivery they facilitated corresponds to the value they communicated to the purchaser of the item.
Art. 24 para. 6 VATG
6 The following shall not be included in the tax base:a. Ticket taxes, property transfer taxes, and the value-added tax due on the service itself; b. Amounts received by the taxable person from the person receiving the service as reimbursement for expenses incurred on their behalf, provided these are shown separately (pass-through items); c. the portion of the consideration that pertains to the value of the land when selling an immovable property; d. the cantonal charges included in the price for disposal and supply services to water, wastewater, or waste funds, insofar as these funds make contributions to disposal facilities or waterworks therefrom.
Value Added Tax Regulation of November 27, 2009 (VAT Reg) > Title 5: Procedural Law for Domestic and Consumption Tax > Chapter 1: Rights and Obligations of the Taxable Person > Section 2: Settlement > Settlement according to the net tax rate or the lump-sum tax rate method
Art. 127 Para. 1 VAT Reg
(Art. 71 and 72 VAT Act)
Art. 127 Para. 1 VAT Reg
1 Under the net tax rate and lump-sum tax rate method, the taxable person must appropriately record the following values for the settlement with the Federal Tax Administration (ESTV): a. the total of all consideration subject to domestic tax; this includes particularly the consideration for: 1. taxable services, broken down by net tax rates or lump-sum tax rates, 2. services exempt from tax under Article 23 VAT Act, 3. services to beneficiaries under Article 2 GSG, which are exempt from value added tax according to Article 143 of this regulation, 4. services for which the reporting procedure under Article 38 VAT Act was applied, 5. services exempt from tax under Article 21 VAT Act; 1. taxable services, broken down by net tax rates or lump-sum tax rates, 2. services exempt from tax under Article 23 VAT Act, 3. services to beneficiaries under Article 2 GSG, which are exempt from value added tax according to Article 143 of this regulation, 4. services for which the reporting procedure under Article 38 VAT Act was applied, 5. services exempt from tax under Article 21 VAT Act; b. reductions in the consideration under settlement according to agreed considerations, as far as they are not accounted for in another item; c. those not within the scope of value added tax: 1. consideration from services whose place is abroad according to Articles 7 and 8 VAT Act, 2. flows of funds not considered as consideration under Article 18 Paragraph 2 Letters a–c VAT Act, 3. other flows of funds not considered as consideration under Article 18 Paragraph 2 Letters d–l VAT Act; 1. consideration from services whose place is abroad according to Articles 7 and 8 VAT Act, 2. flows of funds not considered as consideration under Article 18 Paragraph 2 Letters a–c VAT Act, 3. other flows of funds not considered as consideration under Article 18 Paragraph 2 Letters d–l VAT Act; d. the total of the consideration for services subject to consumption tax, broken down by tax rates; e. and f. … g. the corrections according to Articles 79 Paragraphs 3 and 4, 81 Paragraphs 4 and 5 as well as 83 Paragraph 1.
Art. 127 Para. 2 VAT Reg
2 The ESTV may consolidate multiple values under Paragraph 1 under one item of the accounting form or waive the requirement to request them within the periodic settlement.
Value Added Tax Regulation of November 27, 2009 (VAT Reg) > Title 5: Procedural Law for Domestic and Consumption Tax > Chapter 1: Rights and Obligations of the Taxable Person > Section 2: Settlement > Settlement according to the net tax rate or the lump-sum tax rate method
Art. 127 Para. 1 VAT Reg
(Art. 71 and 72 VAT Act)
Art. 127 Para. 1 VAT Reg
1 Under the net tax rate and lump-sum tax rate method, the taxable person must appropriately record the following values for the settlement with the Federal Tax Administration (ESTV): a. the total of all consideration subject to domestic tax; this includes particularly the consideration for: 1. taxable services, broken down by net tax rates or lump-sum tax rates, 2. services exempt from tax under Article 23 VAT Act, 3. services to beneficiaries under Article 2 GSG, which are exempt from value added tax according to Article 143 of this regulation, 4. services for which the reporting procedure under Article 38 VAT Act was applied, 5. services exempt from tax under Article 21 VAT Act; 1. taxable services, broken down by net tax rates or lump-sum tax rates, 2. services exempt from tax under Article 23 VAT Act, 3. services to beneficiaries under Article 2 GSG, which are exempt from value added tax according to Article 143 of this regulation, 4. services for which the reporting procedure under Article 38 VAT Act was applied, 5. services exempt from tax under Article 21 VAT Act; b. reductions in the consideration under settlement according to agreed considerations, as far as they are not accounted for in another item; c. those not within the scope of value added tax: 1. consideration from services whose place is abroad according to Articles 7 and 8 VAT Act, 2. flows of funds not considered as consideration under Article 18 Paragraph 2 Letters a–c VAT Act, 3. other flows of funds not considered as consideration under Article 18 Paragraph 2 Letters d–l VAT Act; 1. consideration from services whose place is abroad according to Articles 7 and 8 VAT Act, 2. flows of funds not considered as consideration under Article 18 Paragraph 2 Letters a–c VAT Act, 3. other flows of funds not considered as consideration under Article 18 Paragraph 2 Letters d–l VAT Act; d. the total of the consideration for services subject to consumption tax, broken down by tax rates; e. and f. … g. the corrections according to Articles 79 Paragraphs 3 and 4, 81 Paragraphs 4 and 5 as well as 83 Paragraph 1.
Art. 127 Para. 2 VAT Reg
2 The ESTV may consolidate multiple values under Paragraph 1 under one item of the accounting form or waive the requirement to request them within the periodic settlement.
Federal Act of June 12, 2009 on Value Added Tax (Value Added Tax Act, VATG) > 2. Title: Domestic Tax > 2. Chapter: Tax Object > Principle
Art. 18 Para. 1 VATG
1 Domestic tax applies to services provided in the territory by taxable persons for remuneration; they are taxable, unless this law stipulates an exception.
Art. 18 Para. 2 VATG
2 In the absence of services, the following cash flows in particular do not qualify as remuneration: a. Subsidies and other public-law contributions, even if they are paid based on a service mandate or a program agreement according to Article 46 Para. 2 of the Federal Constitution; b. Funds that health and tourism associations receive exclusively from public-law tourism taxes and that they use on behalf of communities for the benefit of the public; c. Contributions from cantonal water, wastewater, or waste funds to disposal facilities or waterworks; d. Donations; e. Contributions to enterprises, especially interest-free loans, restructuring services, and waivers of claims; f. Dividends and other profit shares; g. Contractually or legally regulated compensation payments made by an organizational unit, in particular by a fund, to actors within an industry; h. Deposits, namely on enclosures and containers; i. Payments for damages, compensation, and similar; j. Compensation for employed activities such as board member and foundation board fees, official compensation, or salary; k. Refunds, contributions, and grants for deliveries abroad that are exempt from tax according to Article 23 Para. 2 No. 1; l. Fees, contributions, or other payments received for sovereign activities.
Art. 18 Para. 3 VATG
3 If a community explicitly designates resources it allocates to the recipient as a subsidy or as another public-law contribution, these resources shall be considered subsidies or other public-law contributions within the meaning of Paragraph 2 Letter a.
Federal Act of June 12, 2009 on Value Added Tax (Value Added Tax Act, VATG) > 2. Title: Domestic Tax > 2. Chapter: Tax Object > Principle
Art. 18 Para. 1 VATG
1 Domestic tax applies to services provided in the territory by taxable persons for remuneration; they are taxable, unless this law stipulates an exception.
Art. 18 Para. 2 VATG
2 In the absence of services, the following cash flows in particular do not qualify as remuneration: a. Subsidies and other public-law contributions, even if they are paid based on a service mandate or a program agreement according to Article 46 Para. 2 of the Federal Constitution; b. Funds that health and tourism associations receive exclusively from public-law tourism taxes and that they use on behalf of communities for the benefit of the public; c. Contributions from cantonal water, wastewater, or waste funds to disposal facilities or waterworks; d. Donations; e. Contributions to enterprises, especially interest-free loans, restructuring services, and waivers of claims; f. Dividends and other profit shares; g. Contractually or legally regulated compensation payments made by an organizational unit, in particular by a fund, to actors within an industry; h. Deposits, namely on enclosures and containers; i. Payments for damages, compensation, and similar; j. Compensation for employed activities such as board member and foundation board fees, official compensation, or salary; k. Refunds, contributions, and grants for deliveries abroad that are exempt from tax according to Article 23 Para. 2 No. 1; l. Fees, contributions, or other payments received for sovereign activities.
Art. 18 Para. 3 VATG
3 If a community explicitly designates resources it allocates to the recipient as a subsidy or as another public-law contribution, these resources shall be considered subsidies or other public-law contributions within the meaning of Paragraph 2 Letter a.