VAT Exemption for Small Businesses: What It Does and Does Not Cover

If your turnover stays below CHF 100,000, you are not liable for VAT and do not add it to your invoices. But the exemption has a downside worth understanding.

What the exemption gives you

You do not charge VAT on your invoices and you do not file VAT returns. That removes a significant administrative burden for small businesses and side hustles.

You also avoid the quarterly or monthly reporting obligation, along with the need to track input and output VAT separately. Your bookkeeping stays simpler for longer.

The exemption applies automatically once you stay below the threshold. There is no application form to file and no approval to wait for.

For a business selling mainly to private individuals, the exemption is usually a pure win. Your clients pay no VAT and you carry no filing duty.

• No VAT on your invoices.
• No VAT returns to file.
• Simpler bookkeeping.

What it costs you

You also cannot reclaim the input VAT you paid on your own business purchases — software, hardware, equipment, professional fees. For some businesses, reclaiming that input VAT is worth more than the admin it adds.

The input VAT you cannot reclaim effectively becomes an extra cost. On a CHF 5,000 purchase at 8.1%, that is over CHF 400 you simply absorb.

This matters most for businesses with high VAT-bearing costs and low labour, such as those buying equipment, licensing software or paying professional advisers.

For service businesses whose main input is their own time, the lost reclaim is small. The maths of voluntary registration depends heavily on your cost structure.

The trade-off

Make the calculation concrete: estimate your annual input VAT and compare it to the admin cost and any pricing impact of adding VAT to your invoices.

Remember that charging VAT does not usually cost your business clients anything, since they reclaim it. The real cost lands on private clients, who cannot.

Re-run the analysis each year. As your client mix and purchases change, the better option can switch — sometimes faster than you expect.

When to revisit

The moment your turnover approaches CHF 100,000, the exemption disappears and registration becomes mandatory. That forces the question regardless of your preference.

Plan the transition before it happens. Update your invoice template, tell your regular clients, and decide how you will price the addition of VAT.

If you register voluntarily before you must, you choose the timing and can align it with a period when a large purchase is imminent, maximising your first reclaim.

facturio supports both states: exempt invoices with no VAT, and VAT-registered invoices with the correct rate, so switching is a settings change rather than a rework.