The fictitious input tax deduction allows businesses to deduct input tax on individualised, movable goods even when no invoice showing VAT has been issued. It's an important measure for reducing the tax burden and strengthening competitiveness. And yet it is regularly overlooked by many SMEs.
The fictitious input tax is a concept related to value added tax (VAT). It refers to the input tax that a business can claim for expenses arising from the acquisition of goods for taxable business purposes but for which no invoice with VAT stated is available.
In Switzerland, the fictitious input tax deduction can be claimed when an individualisable movable item is purchased in the course of business activity entitled to input tax deduction, and no VAT is openly passed on at the time of purchase. The ESTV assumes that a non-taxable person purchased the item with a VAT burden so there is a right to deduct input tax on an item correctly invoiced without VAT.
Normal vs. fictitious input tax deduction compared
Which goods are eligible for the fictitious input tax deduction?
The conditions for the normal input tax deduction apply here by analogy. Under the VAT Act (as of 1 January 2023), taxable persons may under certain conditions claim a fictitious input tax deduction pursuant to Art. 28a of the VAT Act.
A movable item is considered individualised if it can be visually or structurally identified based on individual marking, accounting records, or obvious circumstances. An example: a deer that must be presented to the game warden for registration according to cantonal hunting regulations the registration gives it an individual identifier.
This example shows that the fictitious input tax deduction is not limited to motor vehicles but can be applied more broadly.
A further option exists for primary production services. These are generally exempt from tax (Art. 21 para. 2 lit. 26 VAT Act). To avoid a shadow tax on the products of these primary producers, taxable buyers may pursuant to Art. 28 para. 2 VAT Act deduct the reduced tax rate on the invoiced amount as input tax provided that the service provider's residential or business address and farm buildings are located in Switzerland.
Documentation for the deduction of fictitious input taxes
To justify the deduction and withstand any tax audit, careful documentation is essential. Pay attention to the following:
1. Purchase contract and individual characteristics Make sure the purchase contract clearly states the individualised aspects of the acquired item. If no purchase contract exists, request a detailed invoice from the supplier specifying the purchased items.
2. Asset register for items not intended for resale If the acquired items are not resale goods, additionally maintain a detailed asset register including the date of purchase and individual identification of each item.
Conclusion on the fictitious input tax deduction
Deducting fictitious input taxes when purchasing individualized, movable property is an effective way to reduce the tax burden and strengthen competitiveness. Accurate documentation and verification are crucial in order to justify the input tax deduction and to withstand possible audits. Individual identification, detailed invoices, purchase contracts and, where appropriate, investment directories play an important role. In case of uncertainty, it is advisable to consult experts or submit an enquiry to the Federal Tax Administration (FTA) to ensure that fictitious input taxes are correctly deducted.
Disclaimer: The content of this blog post is for informational purposes only and does not constitute professional advice. Each individual case should be reviewed individually and we recommend that you seek professional advice for specific questions.
