Entrepreneurship in Switzerland involves unexpected risks: advertising on Facebook can become a cost trap. Sudden tax payments in the five-digit range are currently not uncommon if you are not aware that Facebook Ads are subject to a special tax trap. Similar regulations also apply to Google Ads or other advertising service providers that are based abroad and are not registered for VAT in Switzerland.
“Online entrepreneurs are increasingly coming to us because they have to pay thousands of Swiss francs in additional payments. The reason: Facebook advertising is a service abroad and is therefore subject to VAT,” reveals Henrik Telepski, managing director and owner of Telepski Treuhand GmbH. He is a trustee and knows Swiss corporate tax law inside out. In the following article, Telepski reveals how this cost trap can be avoided and what other pitfalls lurk for digital companies.
Facebook advertising: an expensive affair for Swiss companies
Facebook advertising is an important part of the marketing strategy of many companies worldwide. In Switzerland, too, Facebook is often used as a marketing channel to advertise products and services and address target groups. But what many companies don't know: Facebook advertising can quickly become an expensive affair or cost trap and lead to unexpected tax payments.
The reason for this lies in the special tax treatment of Facebook Ads. Facebook is a service from abroad and is therefore subject to purchase tax. This means that Swiss companies that place Facebook advertising must subsequently and independently pay a tax on this service.
The tax trap: Why Facebook Ads are subject to income tax
Many companies are not aware of this cost trap and often leads to unexpected tax payments amounting to five figures. Small and medium-sized companies in particular that do not deal intensively with Swiss tax law can quickly fall into this trap. But even larger companies are not immune.
How to avoid the tax trap
But how can you avoid the tax trap? “The nice thing about the purchase tax trap is that it can be easily 'defused',” explains Henrik Telepski. “If you are already subject to VAT, you can get the purchase tax back by choosing the right billing method. Anyone who is not yet subject to VAT can also voluntarily register for VAT. In this case, you have to choose the right billing method in order to be able to reclaim the purchase tax,” Telepski continued. Working with a fiduciary who is familiar with taxes for online entrepreneurs is highly recommended to avoid falling into such traps.
Changing the VAT method: An option for Swiss companies
One way to reduce the tax burden of Facebook advertising is to change the sales tax method. Specifically, it is about switching from the so-called net tax rate method to the effective method. This method is often very beneficial for companies as it allows the recovery of input tax on goods and services. This also includes the reclaim of input tax.
This can reduce the effective costs of Facebook advertising. However, companies should keep in mind that changing the sales tax method can also have disadvantages and effects on other areas of the company.
Conclusion: Facebook advertising can quickly become a tax trap for Swiss companies. Companies should therefore take a close look at the tax regulations and take targeted measures to reduce the tax burden.
Also read: Google cracks down on fake reviews
Source:
Press portal
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