VAT - What is the benefit of using the declaration procedure? (Article 38 VAT Act)

 

The main advantage, really the big advantage of using this procedure is really of a financial nature, that is to say in order to avoid having to immobilize or avoid the flow of money which can have a strong impact on the cash flow. -flow).

Example:

A building is sold for CHF 10,000,000 with VAT.

In a classic case, the seller (alienator) will have to send an invoice to the buyer for CHF 10,000,000 + VAT at 7.7%. This taxable delivery will have to appear as opted turnover in the VAT statement (figures 200 and 205).  

The buyer, for his part, will have to pay 7.7% VAT on the purchase of the building. This preliminary tax can then be possibly recovered in the buyer's VAT statement, depending on the use of the building that he makes of it (taxable turnover resulting from rentals with VAT or excluded turnover resulting from rentals without VAT).

In this classic case, there will be a huge flow of money of CHF 770,000. - (= 7.7% VAT on CHF 10,000,000. -) that the buyer will have to immobilize: he will have to collect that money, then make a wire transfer. If this VAT is recoverable as input tax, it will only be recoverable weeks later, when AFC Berne refunds the VAT statement to the buyer.

With the seller, the same, if the latter was not careful, for example, put this VAT of CHF 770,000. - on hold in a blocked bank account, until payment to AFC Berne, but on the contrary squandered this money, collected during the payment of the invoice by the buyer, by paying various operating costs (eg salaries, FG etc.), then the seller will be in great financial difficulties when having to pay his VAT statement:

Finally, in the special case of the declaration procedure, there is no flow of money (no outflow of money at the buyer, no inflow of money at the seller), no cash
because the transfer is announced to AFC Berne by means of the declaration procedure which is a simple form (no 764) to be completed by the seller and the buyer. Again, to use this form and this procedure, it is still necessary that conditions are met, in particular that both parties to the contract (buyer and seller) are subject to VAT. 

Also, IMPORTANT, as soon as the proportion of use by the buyer and the seller are the same (eg 100% taxable use), then no correction is to be made, only the form must be completed. On the other hand, where it gets complicated is when the proportion of use is no longer the same (eg: 100% taxable at the alienator and 60% at the buyer) which can lead to a change of use. (PASM self-service or subsequent deduction from the DUIP input tax) at the buyer's premises. 

This change of assignment, which represents a correction, can on the other hand generate an outflow of money (in the case of the PASM) at the acquirer, in addition to the declaration procedure.

For details, please visit: finexoutsourcing.com

 

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