Cancellation Fees (Annullationskosten) in Switzerland: When a Kept Fee Owes MWST

A customer cancels two days before the workshop; your terms let you keep 30 per cent. Is that fee turnover carrying MWST, or compensation outside the VAT return? Swiss law answers with one distinction: what, if anything, the payment buys.

A fee with no supply behind it is not turnover

Art. 18(2) MWSTG draws the line at the supply: funds arriving "due to the absence of any supply" are not consideration, and letter i names "payments of damages, satisfaction and the like" among them.[1] A fee that compensates a loss is damages, not a price.

The ESTV applies that rule sector by sector: its hotel and restaurant guidance treats payments for cancellations, no-shows included, as genuine damages — no consideration for the innkeeper or hotelier, no input-tax correction triggered.[2] Why the money moves decides, not the invoice label.

Genuine means genuine: the fee compensates a real loss — the room night you could not resell, the calendar day you cannot fill. It prices nothing the customer receives.[2] A settlement covering only that loss never enters turnover; no output tax arises on it.[1]

Keep it auditable: document the cancellation with a copy of the receipt handed to the customer,[2] and file it with the terms showing the agreed charge.

When the fee becomes consideration

Art. 24(1) MWSTG calculates the tax on "the consideration actually received" — cost reimbursements included.[1] Whatever a payment prices, VAT follows it.[1]

Cases that merely look like cancellations: half the report delivered and kept; a rebooking processed; materials changing hands. Those payments buy supplies and carry MWST at your normal rate.[1]

Mixed settlements need two lines: the part compensating blocked capacity is damages under Art. 18(2)(i); the part pricing performed work is taxable consideration.[1] Split the document and label each amount by what it pays for.

The test travels to every trade: no supply behind the payment, Art. 18(2)(i) keeps it outside the tax;[1] a supply performed, Art. 24(1) pulls it in.[1] Assess uncertain cases before filing.

Deposits and invoices already issued: correct, or keep the tax

Deposits complicate timing: tax on them arises early.[1] Art. 40(1)(c) MWSTG sets the tax point "with the collection of the consideration on advance payments" — output tax on a deposit is due the moment it lands.[1]

Cancel later and keep the deposit as damages, and its character changes: consideration for a supply that will never happen becomes compensation. Art. 41(1) MWSTG adjusts the turnover tax liability when the correction is booked or the corrected consideration collected.[1]

The ESTV's warning to hoteliers generalises: if the ordered service was already invoiced and no correction document (Korrekturbeleg) is issued, the collected amount remains taxable at the applicable rate.[2] Keep the money, keep the tax.

The credit note is not optional tidiness — it is what moves the kept fee out of turnover. Art. 27(4) MWSTG sets the pattern: a correction document requiring acknowledgement of receipt, referring to and revoking the original invoice.[1]

The settlement document and the Art. 27 trap

Formally, Art. 26(1) MWSTG obliges an invoice only on request, and only for supplies; a genuine damages settlement is not one.[1] Issue a receipt anyway: state that the payment compensates a cancellation, with no tax line.

The trap is Art. 27(2): whoever shows VAT details without entitlement, or too high a tax, owes the tax shown — unless the invoice is corrected or the Confederation is shown to have lost nothing.[1] Printing 8.1 per cent on damages turns the settlement into declared tax.[1]

The ESTV devotes a section of its bookkeeping and invoicing rules to Unrichtiger oder unberechtigter Steuerausweis: whoever shows a tax without entitlement, or too high a tax, owes the tax shown.[3]

facturio tags every settlement with its VAT treatment, so a kept deposit leaves turnover the moment the correction is booked. Sources: [1] Federal Act on Value Added Tax (MWSTG), fedlex; [2] ESTV MWST-Branchen-Info 08 Hotel- und Gastgewerbe; [3] ESTV MWST-Info 16 Buchführung und Rechnungsstellung.