Increase in Swiss VAT as of January 1, 2024
background
The yes to the “AHV 21 reform” and the associated federal decision on additional financing of the AHV through an increase in VAT means that the VAT rates will be increased from January 1, 2024. The following sentence changes are particularly relevant for law firms:
Sentence | until now | new |
Normal tax rate | 7.7 | 8.1 |
reduced tax rate | 2.5 | 2.6 |
Net tax rate | 5.9 | 6.2 |
As a result of the tax rate increase, the sales limit and the tax payment burden for the application of the balance tax rate method will also be adjusted. This is now CHF 5,024,000 (sales limit) or CHF 108,000 (tax payment burden).
Invoicing based on agreed or collected fees
The decisive factor for the applicable tax rate is neither the date of the invoice nor the date of payment, but rather the time at which the service is provided . Services provided until December 31, 2023 are subject to the previous tax rates, and services provided from January 1, 2024 are subject to the new tax rates. If services that are subject to both the previous and the new tax rates due to the period in which they were provided are listed on the same invoice, the date or period of service provision and the corresponding amount must be shown separately.
timeSensor LEGAL supports invoicing with mixed tax rates. Typically, after the changeover, you will continue to process older services at the previous tax rate and new services at the new tax rate for some time. Therefore, after the changeover, different service codes are available in the software for recording services:
- The previous, usual service codes (e.g. h ) result in the service being billed at the new tax rate
- The same service codes with an appended underscore (e.g. h_23_ ) cause the service to be billed at the old tax rate
timeSensor LEGAL already worked according to this principle when the sentence was last changed on January 1, 2018. If your database still has performance codes with _17_ appended to them from the previous change, these will now be automatically removed.
Advance invoices are completely canceled when credited and the VAT is credited back at the historical rate. The new rate will then be applied when crediting. This means you don't have to worry about the advance invoice because the software takes care of the correct chargeback or crediting.
Start the setup wizard
In order for you to be able to process the new VAT rates, the software must be prepared. The easiest way is to make the adjustment on the first working day of the new year . A setup wizard is available for this purpose. You can find this in the Special section, in the Accounting menu, after opening the VAT rates window. When this window is open, you will find a Tools menu in the menu bar with the entry Adjust set.
The setup wizard will now open. Here click on Start process .
After the change
Tax rates
The setup wizard has added the new tax rates to your database. The new tax rates have adopted the previous abbreviations, while the previous tax rates have been renamed by appending the expression _23_. However, you may still need to rename the tax rate codes for export to your accounting software.
Performance groups
The service groups subject to VAT have been doubled. The new service groups have the same name as the previous service groups, while the old tax rate was added to the name of the previous service groups.
Services
The benefits were doubled. Use the usual abbreviations for all services from January 1, 2024. These services will now be billed at the new VAT rate. Use the abbreviation with _23_ appended (e.g. h_23_) to record services before January 1, 2024. Such services will be billed at the previous VAT rate.
Price lists
The setup assistant has automatically added the new services to all price lists.
Surcharges or discounts
If you have entered a percentage surcharge or discount in mandates, the setup wizard has now also added this rule for the new service group.
For an invoice with old and new service abbreviations, the flat rate expense is calculated separately for each service group so that the VAT can be shown correctly. The following example shows an invoice with fees of 700.00 at the new tax rate and fees of 350.00 at the old tax rate:
Final theses
Review revenue accounts
Some law firms have set up income accounts based on tax rates in their chart of accounts. For example, you could have a “Yield 7.7%” account in your chart of accounts. If this is the case, you should coordinate with your trustee: should a new income account “Yield 8.1%” be set up? If so, the new account must be added to the timeSensor LEGAL chart of accounts. In addition, the new service groups must be linked to the new account. If no, then you don't need to do anything else: then timeSensor LEGAL will simply continue to post all sales to the existing accounts.
Check VAT accounts
Some law firms have set up VAT accounts based on tax rates in their chart of accounts. For example, you could have an account “Vendor VAT 7.7%” in your chart of accounts. If this is the case, you should coordinate with your trustee: should a new passive account “Creditor VAT 8.1%” be set up? If so, the new account must be added to the timeSensor LEGAL chart of accounts. The new tax rates must also be linked to the new account. If no, then you don't need to do anything else: then timeSensor LEGAL will simply continue to post all sales to the existing accounts.
Check VAT codes
In order for you to be able to export bookings from timeSensor LEGAL to your trustee's accounting program, the VAT codes must match. Check with your trustee about the VAT codes they use and adjust where necessary. It is important that the tax rate codes between timeSensor LEGAL and the accounting software used match.
Review mandate budget
Do you have mandates for which a budget is stored in the Controlling tab? This may now have to be reset if the budget relates to a specific service group or a specific service code. If necessary, enter the new service group or the new service code. For example, you can use the “Set start date” command to store a new budget calculation from January 1, 2024:
Related Articles
Reduced VAT in Germany - Extension for RVG invoices
General information The time to implement the temporary reduction in VAT rates in Germany (COVID Economic Package of the Federal Government) was very short, which is why we had focused on hour-based fee notes in the adjustments in timeSensor LEGAL. ...How is credit booked correctly?
Initial situation: You try to book a negative amount so that by clicking on the gear for invoicing the invoice image shown below. Solution: If this is the case, this is because the overpayment must first be recorded in accounting. Procedure: To do ...VAT: Agreed vs. fees collected
This article has been machine translated. If you find any errors, we would be grateful if you could report them to translation@timesensor.com. Facturation selon les tarifs convenus Le décompte selon les contre-prestations convenues (art. 39, al. 1, ...What should you pay attention to after the turn of the year?
At the turn of the year there are a few things for the timeSensor LEGAL administrator to consider and check. You will find the most important information in the following entry and in the article on annual accrual ...How do I change fixed prices for services? (e.g. postage costs)
General In timeSensor Legal you can create different types of services. The settings can be found under Settings/Basic data/Services (see screenshot). It makes sense to set fixed prices for some of these services, such as for sending letters, copies, ...