What is VAT?
VAT is the abbreviation of Value-Added Tax and is in general due when goods and/or services are sold. It generally applies to all goods and services that are bought and sold for use or consumption in Switzerland. It is a Consumption Tax because it is borne ultimately by the final consumer.
Who must pay VAT?
Generally, VAT is invoiced by the supplier that is selling goods or services and collected from the customer. Subsequently, the supplier reports and remits the collected VAT to the tax authorities.
Why am I being charged VAT?
Freshworks provides Software-as-a-Service that falls within the rules concerning Electronically Supplied Services in Switzerland. As such, Freshworks (as a VAT registrant) is required to collect Swiss VAT on all products/services made to customers in Switzerland.
How is Freshworks determining which customers Swiss VAT applies to?
Freshworks will apply VAT if the location of the “bill-to/ ship-to” contact address entered by the customer is in Switzerland. This information is subject to cross-referencing against other data to verify that the “bill-to/ ship-to” country is accurate.
It is your responsibility as a customer to ensure that your bill-to/ ship-to address is correct.
Does Freshworks provide VAT exempt or non-VATable services?
No. All services currently provided by Freshworks to customers in Switzerland are subject to Swiss VAT.
Are there any special exemptions applicable for charities under which VAT may not be charged?
No. There are no exemptions from VAT available under Swiss VAT rules for the services Freshworks supplies to charities in Switzerland.
Will VAT apply even if a Swiss company provides a valid VAT number to Freshworks?
Yes. Since Freshworks is VAT registered due to services provided to customers that are not VAT registered, VAT now applies to all the products/ services that Freshworks makes to customers in Switzerland, regardless of their VAT registration status.
Are there any VAT obligations for me as a customer?
No. The customer in principle has no VAT obligations. If you are a registered for VAT in Switzerland and you want to claim an input tax credit for the VAT paid to Freshworks, as a minimum, you should ensure to keep a copy of Freshwork’s invoice for your records.
Disclaimer
Every customer is unique and so are their specific tax circumstances. The above stated information should not be considered as tax advice, but as a general overview of relevant tax rules. Freshworks cannot provide you with tax advice for your individual situation, and therefore we strongly recommend speaking with a professional tax advisor for tailored advice.