Why the «third-party payer» is an everyday topic for SMEs
In many Swiss SMEs — distributors, professional firms with management mandates, group service companies or B2B platforms — operations regularly arise in which a company orders, pays or issues invoices not on its own account, but on behalf of a client, an affiliate or a principal. Centralized orders (shared procurement), framework contracts with single invoicing and advance payments on behalf of third parties are typical examples.
From the perspective of the Code of Obligations and the VAT Act (LTVA), however, it is not enough to name the «true» beneficiary in a footnote: clear contracts, consistent documents and postings that separate your own receivables, payables and revenue or costs from those of the third party are required. Errors at this stage complicate input tax deduction, FTA audits and year-end closing.
This guide outlines the most frequent scenarios in Switzerland, the general VAT treatment and a practical accounting framework for SMEs using centralized orders or B2B invoicing in the name of third parties — without confusing agency, commission and resale.
Typical scenarios: who invoices, who pays, who is liable for VAT
Before setting up accounts and workflows, it is essential to qualify the legal relationship. The table summarizes the most common B2B variants:
| Scenario | SME role | Supplier invoice | Economic effect |
|---|---|---|---|
| Purchase on behalf of the client (advance / procuration) | Agent: pays then re-invoices or reimburses | Addressed to the SME; the client does not appear as buyer on the supplier document | Neutral cost if pass-through; separate fee if any |
| Group centralized order | Purchasing hub invoices and allocates to branches | Supplier invoices the hub; internal allocation | Intercompany suspense accounts; no revenue on goods passed through |
| Invoicing in the name and on behalf of the principal | Issues invoice to the end debtor on behalf of third parties | Document showing the principal and the mandate | Only commission or management fee as revenue |
| Resale / dropship to B2B client | Buyer-reseller (own supply chain) | Supplier → SME; SME → client at own price | Full revenue; VAT on sale and purchase (except special cases) |
| Marketplace platform (agent) | Intermediation; split collection | Seller invoice to buyer; platform invoices fee | Taxable fee only if not part of the delivery chain |
Misclassification — for example treating a resale as a simple advance — is one of the most frequent causes of discrepancies between the VAT balance and the general ledger.
Contractual basis and document traceability
Purchase or invoicing mandate
A written contract (or accepted general terms) must define: who is debtor to the supplier, who bears the risk of the end client's insolvency, whether the SME may retain a commission and within what timeframes amounts collected must be transferred.
For invoicing «in the name and on behalf of», the mandate must be referenced on the document issued, with clear identification of the principal and the recipient of the supply.
Centralized orders and internal POs
For group-wide orders, a single supplier-side order number and, on the ERP side, a mandatory «cost center / beneficiary unit» field are advisable. Each purchase line must be allocable to a group company or project before payment.
Keep correspondence with the supplier (confirmations, delivery notes) and the approved internal allocation: in an audit or VAT review they demonstrate the absence of hidden revenue.
B2B invoices: mandatory content and third-party mention
In Switzerland, a valid invoice for input tax deduction must comply with Art. 26 LTVA (minimum content, identification of parties, rate, tax base). In third-party flows, ensure consistency between who appears on the invoice and who performs the supply for VAT purposes:
- •Pass-through to the client: the SME issues the client an invoice (or debit note) that breaks down supplier amounts, VAT if due on the fee, and any reimbursable expenses. Avoid «inflating» turnover with amounts that are not revenue.
- •Supplier invoice addressed to the SME: if the goods or service are for a third party, input tax deduction generally belongs to the SME only if the purchase is for its own taxable activity; for purchases purely on others' account the SME often acts merely as an intermediary — deduction must be assessed strictly and documented.
- •Invoicing on behalf of the principal: state explicitly that the invoice is issued on behalf of [name and UID of the principal] and that payment must be made according to the mandate instructions (dedicated principal account or agreed payment instructions).
Watch self-billing and credit notes: if you correct pass-through amounts on behalf of third parties, the credit note must link to the original document and the suspense account, not to operating revenue. For cross-border B2B operations, verify export/import of services and the place of supply separately.
Accounting split: suspense accounts and neutrality of results
The accounting objective is that amounts collected or paid on behalf of third parties must not alter revenue, cost of materials or operating margins. The scheme below suits SMEs with full accounting (Swiss GAAP FER / micro):
| Account (example) | Use |
|---|---|
| 1090 / 2090 — Third-party suspense (asset/liability) | Advances paid to supplier on client's behalf; amounts to re-invoice or reimburse |
| 1190 — Trade receivables (fees only) | Management commission, contractual taxable markup |
| 2000 / 4000 — Payables and revenue | Own operations only; never book pass-through as revenue 4000 |
| Intercompany account (group) | Centralized order allocation; cleared with allocation invoice or internal charge |
Numeric example: supplier advance and re-invoicing to the client
A supplier invoices CHF 10'000 + VAT 8.1% (CHF 810) to the SME for materials destined for client C. The SME pays and records: Third-party suspense liability / Bank CHF 10'810. Upon documented delivery, re-invoice to C for CHF 10'810 (pass-through) with reversal of the suspense: Trade receivables / Third-party suspense. If the SME earns CHF 200 fee + VAT: Trade receivables / Service revenue CHF 216.20 (standard 8.1% rate on the fee).
At month-end the suspense account balance should approach zero for closed items; persistent balances indicate missing invoices, unallocated payments or mis-postings to cost centers.
VAT compliance: supply, subrogation and centralized orders
Under the LTVA, tax applies to the supply made for consideration in Swiss territory. In mandates of mere collection or payment without assumption of the economic risk of the supply, often only the commission or management fee constitutes the SME's own tax base — not the entire turnover passed on to the client.
If the SME buys and resells (including direct delivery to the B2B client), it generally performs two distinct taxable supplies (purchase with right to deduct, sale with tax due), except special regimes or exempt supplies. The document chain must align: order, supplier invoice, client invoice, delivery note if applicable.
In intragroup centralized orders, internal allocations do not replace the external supplier invoice: the hub deducts VAT on the purchase if use is taxable; branches receive an internal charge with VAT treatment to be defined (intragroup supplies, possible exclusion if cumulative requirements are met). For complex groups, tailored advice and consistent FTA reporting schemes are advisable.
VAT register and return
In the sales register, separate taxable fees from pass-through amounts recorded on suspense accounts (non-taxable). Verify that pass-through amounts do not improperly flow into Line 200 (total consideration) or standard-rate tax bases (Line 303); Line 220 concerns exempt supplies under Art. 23 LTVA, not pass-through. Document adjustments for credit notes linked to third parties.
Payments and subrogation
If you collect on behalf of the principal, use dedicated bank accounts or reconciliation rules that immediately separate amounts «owned» by the third party. Retain commissions only where the contract allows and after the accounting item is closed.
Common errors and warning signs in the financial statements
- Inflated revenue: pass-through posted to account 4000 artificially increases turnover and can shift audit thresholds or bank covenants.
- VAT deducted on «non-own» purchases: unjustified deduction on the client's reimbursable expenses without mandate and without own supply.
- Inconsistent suspense accounts: trade receivables including supplier amounts without matching suspense; difficult bank reconciliation.
- Failure to clear intercompany: purchasing hub with inventory or liabilities to branches unsettled at year-end.
- Incomplete B2B documents: missing UID, no mandate reference, wrong rate on fee only.
Operational workflow and digitization with Accountex
A robust process reduces manual work at closing and aligns administrative, purchasing and sales teams:
- Qualification at order stage: «on behalf of third party» / «group hub» flag with mandatory client or beneficiary unit.
- Supplier invoice posting: to suspense or intercompany account, never to material cost if pass-through.
- Document issuance to third party: distinct template for pass-through re-invoicing vs fee invoice; separate numbering if useful for audit.
- Bank reconciliation: rules matching supplier payments and client receipts to the same suspense item.
- Control reports: suspense balance by counterparty, aging > 30/60 days, variance input tax deducted vs suspense.
With integrated accounting such as Accountex, map suspense accounts once, link each B2B invoice to the mandate or internal PO and automate reminders for open suspense items. This way centralized orders, accounting split and VAT filing stay aligned throughout the financial year — not only ahead of the quarterly deadline.
Quick checklist before quarterly VAT closing
| Check | Action |
|---|---|
| Third-party suspense account balances | Reconcile with open items list by client / branch |
| Taxable turnover | Exclude pass-through amounts from total sales |
| Input tax deduction | Verify each supplier invoice is linked to own taxable use or mandate documentation |
| Intercompany | Clear pending charges from centralized orders |
| Document archive | Retain mandates, POs and approved allocations (10 years, commercial and tax requirements) |
Cantonal rules mainly affect income and profit taxes, not the basic logic of federal VAT. For borderline situations (marketplace, triangulation, cross-border services), a trusted advisor or advance ruling with the FTA avoids costly adjustments.