Why the FTA fines sole proprietorships
The Federal Tax Administration (FTA) administers federal taxes: VAT, withholding tax, stamp duty and others. For sole proprietorships, the most frequent contact with the FTA concerns VAT (VAT Act): registration, invoicing, quarterly or semi-annual returns and document audits. Income tax remains cantonal, but an FTA VAT audit can also reveal weaknesses in basic bookkeeping.
According to FTA statistics, thousands of VAT taxpayers receive reminders every year for late filings, adjustments or reassessments. For sole proprietorships without a fiduciary, the main cause is not fraud but organisation: messy Excel, lost receipts, missed deadlines and confusion between personal money and VAT payable.
This guide lists the seven accounting errors that most often lead to FTA sanctions, with the legal basis, typical penalty amounts and concrete preventive measures. It complements the guide on 10 costly mistakes for the self-employed: here the focus is on official FTA consequences, not only opportunity cost.
Overview: the 7 errors and FTA sanctions
Quick reference table. Figures are indicative and depend on amounts involved and severity; the FTA usually applies interest first, then reassessments, and only in cases of intent criminal sanctions.
| # | Error | Typical FTA consequence | Severity |
|---|---|---|---|
| 1 | Late VAT return | 4% late interest + possible surcharge | High |
| 2 | Failure to register above CHF 100,000 threshold | Retroactive VAT + interest + fine | Very high |
| 3 | Non-compliant VAT invoices | Input tax denied / adjustment | Medium |
| 4 | Missing receipts during audit | Input tax rejected | High |
| 5 | Collected VAT not remitted | Debt + interest + possible Art. 175 TPA | Very high |
| 6 | Incorrect VAT return amounts | Adjustment + 20–100% surcharge | High |
| 7 | Non-compliant 10-year archiving | Deductions denied + reconstruction costs | Medium–high |
VAT errors #1–3: deadlines, registration and invoices
The first three errors concern VAT obligations themselves: when to file, when to register and how to issue invoices that are valid in the eyes of the FTA.
1. Filing the VAT return late
The return must be filed within 60 days of the end of the period (quarter or half-year). Many sole proprietorships forget because they have no reminder or wait for the fiduciary «at year-end». The FTA does not always send a reminder before applying interest: it starts automatically from the day after the deadline (Art. 87 para. 1 VAT Act).
Late payment interest of 4% per year on VAT owed (Art. 87 VAT Act). For incomplete returns or intentional evasion, surcharge up to 100% of tax evaded (Art. 88 VAT Act) and, in serious cases, tax evasion proceedings (Art. 175 TPA).
Set recurring calendar deadlines (20 February, 20 May, 20 August, 20 November for quarters). Use software that calculates VAT due and generates the FTA portal file. If you cannot meet the deadline, contact the FTA beforehand — extensions are possible in justified cases.
2. Not registering for VAT after exceeding the threshold
Liability arises when turnover exceeds CHF 100,000 in the preceding 12 months (Art. 10 VAT Act). Many freelancers monitor the calendar year instead of rolling 12 months and remain unregistered for months or years. VAT on revenue for that period must still be paid, but without having invoiced it to clients the cost falls entirely on the business.
Official registration, retroactive VAT settlement for up to 5 years in serious cases, late interest and possible administrative fine. The FTA may estimate turnover if books are not in order.
Monitor cumulative turnover monthly on a rolling 12-month basis. At CHF 80,000, prepare registration, update invoices and software. Submit the registration form within 30 days of exceeding the threshold.
3. Issuing invoices that do not comply with the VAT Act
Invoices without the supplier's VAT number, wrong rate (8.1% / 2.6% / 3.8%), VAT amounts not broken out, or missing B2B foreign customer identification. Simplified invoices have their own rules (Art. 26 VAT Act). A systematic error on dozens of invoices can invalidate the entire period return.
Denial of exemption or input tax for the recipient; adjustment of your own return; in organised fraud, criminal sanctions. For the supplier: obligation to correct with credit note and new return.
Use a Swiss invoice template with all mandatory fields (UID/VAT no., rate, tax base, VAT amount, total). Verify each new foreign client. Update templates after every legal rate change.
Documentation errors #4–5: receipts and collected VAT
During an FTA audit, accounts are checked document by document. Without proof, deductions disappear and debts increase.
4. Not keeping receipts for input tax
Every purchase with VAT in the return must be supported by an original invoice, receipt or equivalent document (Art. 130 VAT Act). Illegible receipts, lost WhatsApp photos, cash expenses without proof: at audit the FTA rejects input tax and recalculates VAT due.
Adjustment of the return with additional VAT owed + interest from the original period. If the taxpayer cannot prove expenses, the FTA may estimate to their disadvantage (Art. 130 para. 2 TPA for linked cantonal tax).
Digitise every receipt within 48 hours. Archive in cloud with backup for 10 years (Ordinance on bookkeeping). Link every bank payment to a document in accounting software.
5. Keeping collected VAT instead of remitting it
VAT on revenue is not income: it is a debt to the FTA. Many sole proprietorships use a personal account, collect «all-inclusive» invoices and spend the amount. At quarter-end they discover a gap of tens of thousands of francs. This is not mere «delay»: it is non-payment that the FTA treats with maximum severity.
Immediate VAT debt + 4% interest + possible surcharge. For repetition or large amounts, suspicion of tax evasion (Art. 175 TPA) with fine up to triple the tax and criminal risk.
Separate business account. Real-time «VAT payable» dashboard. Set aside 8.1% (or applicable rate) on every receipt. Pay the return on the due date, not «when cash allows».
Reporting errors #6–7: returns and archiving
Even with good intentions, a poorly prepared return or documents that cannot be found years later cost as much as an obvious delay.
6. Declaring incorrect VAT amounts or using unauthorised methods
Calculation errors under the effective method, using the net tax rate method without FTA approval, forgetting self-assessment on foreign services, or omitting advances and credit notes. A 5% error on CHF 200,000 turnover means CHF 810 of VAT — plus interest on all prior periods if the audit covers 3 years.
Official adjustment of the return (Art. 88 VAT Act), 20–100% surcharge if negligent or intentional, retroactive interest. For material amounts, extended audit procedure.
Reconcile bank account vs VAT entries every quarter. Have a fiduciary review the first return. Software with automatic effective/net rate calculation and anomaly alerts.
7. Not meeting 10-year retention requirements
The Ordinance on bookkeeping and CO (Art. 958f) require books and supporting documents to be kept for 10 years in readable form. Deleting emails, changing computers without backup, or keeping only local Excel without versioning: in a 2026 FTA audit on 2021, documents are gone.
Inability to prove deductions and input tax → adjustments and unfavourable estimates. Breach of bookkeeping duties may be reported to the cantonal authority for official income tax assessment.
Certified digital archive or cloud with 10+ year retention. Annual export of accounting data. Do not rely on a single laptop: automatic backups and fiduciary access.
Types of FTA sanctions: what you actually risk
The FTA distinguishes formal delay, material error and fraud. Knowing the scale helps assess how urgent it is to get organised.
Late payment interest (4%)
Applied automatically on VAT and withholding tax not paid on time (Art. 87 VAT Act, Art. 37 TPA). No formal decision required: they start from the due date.
Tax surcharge (20–100%)
If the return is incomplete or wrong through negligence (Art. 151 TPA) or for VAT (Art. 88 VAT Act). The percentage depends on severity and taxpayer cooperation.
Tax evasion (Art. 175 TPA)
In qualified fraud: fine up to triple the tax evaded and imprisonment up to 3 years. Rare for simple delays, but possible if collected VAT is deliberately withheld over long periods.
Note: the cantonal authority may apply official income tax assessment (Art. 130 TPA) if the FTA audit reveals documentary chaos beyond VAT. A VAT audit is often the first full warning bell.
5-step anti-fine plan
For a sole proprietorship, these five steps cover most FTA risks described in this guide:
- Separate personal and business accounts; connect the account to accounting software
- Monitor rolling 12-month turnover and register for VAT before exceeding CHF 100,000
- Digitise every receipt and archive for 10 years in the cloud
- File every VAT return on time with amounts verified by bank reconciliation
- Have a fiduciary review at least once a year or use certified VAT automation
7 practical tips
- Set a calendar reminder 10 days before each VAT deadline — not on the due date
- Create a bank sub-category «VAT payable» and do not touch it until FTA payment
- On your first FTA audit, respond within deadlines: cooperation often reduces the surcharge
- Keep supplier invoice emails as well as PDFs: they are valid proof if complete
- If you exceeded the threshold without registering, contact the FTA proactively — penalties are lower than after an assessment
- Do not switch to the net tax rate method without written FTA confirmation that your rates are approved
- Swiss cloud software with integrated VAT filing costs less than a single FTA adjustment
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