Claiming VAT refund means no VAT liability
By applying the procedure for Swiss VAT refund for foreign companies the applicant makes clear that he is not liable for purposes of Swiss VAT. Every year several companies have to experience that they are not eligible for refund but instead should have registered for purposes of Swiss VAT.
Foreign companies are well advised to determine their VAT position before they purchase or sales transactions that one way or another has a link to the Swiss VAT jurisdiction. That determination shall be based on Swiss law and not on assumptions derived from other VAT systems, in particular the European VAT system or the VAT system of one or more EU member states.
Furthermore, because of the limited time that VAT refund requests can be submitted, also in the situation in which a foreign company thinks that it has to register for purposes of Swiss VAT rather than apply the VAT refund regulation, a foreign company needs to be absolutely certain that it shall not or cannot apply the VAT refund regulation.
As VAT liability and the VAT refund procedure exclude each other, a foreign company has only a limited timeframe to decide what procedure shall be applied.
Application is legal statement
By signing and submitting a Swiss VAT refund request you are making a legal statement about the truth and correctness of the application forms and other documents. With the legal statement the foreign company acknowledges that it is subject to specific obligations. Additionally, if the information in the VAT refund application indicates that the foreign company is liable for purposes of Swiss VAT rather than eligible for VAT refund, the Swiss tax authorities are likely to take the necessary steps in that direction. Moreover, a VAT refund request may also trigger an audit of the supplier that charged the Swiss VAT for which the foreign company claims refund. Finally, incorrect statements or other violations of administrative obligations may lead to the imposition of sanctions, like for example administrative fines.
Contracts with suppliers
Every time a foreign company purchases goods of services, both seller and buyer enter into a contract. For as far as the price conditions are concerned, the foreign company shall verify to what the agreement about the price extends. Namely, depending the agreed price conditions or applicable tax clauses the foreign company may or may not be entitled to a repayment by the supplier in case Swiss VAT has been charged although not due. Regularly suppliers charge Swiss VAT despite the fact that the transaction is not subject to Swiss VAT, for example when the vendor sells IT services to a foreign company.
Moreover, a foreign company shall also review own contracts with its customers, namely for as far as the possibility of afterwards charging of VAT is concerned. Retroactive VAT liability has a high conflict potential, not only in the relationship with tax authorities but also with customers.
VAT refund is a part of the puzzle
The refund regulation builds on presuppositions that connect and therefore may have an impact on other VAT issues (e.g. VAT liability) or legal areas other than VAT (e.g. contract law).
Screen your legal position in advance
Review the tax and legal scope of your activities and supplier's contracts before your act or sign. A company is responsible for its own affairs, so don't rely solely on supplier's statements.