The Framework

Switzerland has opted for a VAT-based approach to digital taxation rather than implementing a Digital Services Tax (DST).[1] Non-resident providers of digital services must register for and collect VAT if their global sales exceed CHF 100,000 within a 12-month period. Beginning in January 2025, digital platforms will assume new VAT obligations, making marketplaces responsible for tax collection instead of individual sellers. Additionally, a new regulation starting in January 2024 mandates that streaming services earning over CHF 2.5 million annually in Switzerland invest 4 percent of their Swiss revenue into local film production.

Implications for U.S. Technology Companies

Switzerland’s approach presents both challenges and advantages for U.S. tech companies. The absence of a DST is a positive factor, but VAT compliance remains a significant burden. The shift in tax collection responsibility to platforms increases administrative costs for U.S. digital marketplaces operating in Switzerland. Streaming services such as Netflix and Amazon Prime face added financial pressure from the 4 percent local film investment requirement, which could impact their content strategies or lead to reduced service offerings in the country. However, compared to more aggressive digital tax policies in the EU, Switzerland’s system is relatively neutral and less punitive toward U.S. companies.

How China Benefits

Switzerland’s tax policies do not explicitly favor Chinese tech firms, as VAT and streaming investment obligations apply uniformly. However, since major Chinese streaming services have little presence in Switzerland, they currently avoid the 4 percent investment requirement that directly impacts U.S. platforms. This allows Chinese companies to observe how U.S. firms adapt before deciding on market entry. While Switzerland’s approach does not disadvantage U.S. firms relative to China, the administrative burden could still create friction for U.S. companies operating in the region.

Endnotes