Advance Invoice in Foreign Currency: Correct CHF Conversion for Swiss SMEs

If you're a Swiss SME or freelancer who regularly works with international clients, you know the situation well: the project is priced in euros or US dollars, but your accounting runs in Swiss francs. Once an advance invoice enters the picture, the questions multiply. Which exchange rate applies? At what exact point in time? And how do you handle currency differences that arise between the advance payment and the final invoice?

Why Foreign Currencies Make Advance Invoices Tricky

With a single, one-off invoice, the foreign currency aspect is straightforward: invoice date, booking, done. With advance invoices, however, weeks or even months often pass between the initial payment and final settlement. The EUR/CHF rate can shift noticeably during that time.

This creates two problem areas:

• Accounting: The advance payment recorded in CHF may differ from the original invoice amount once the final bill is settled.
• Tax: VAT reporting to the Federal Tax Administration (ESTV) always occurs in CHF — the relevant conversion date must therefore be clear and consistent.

Which Exchange Rate Applies for VAT?

The Swiss Federal Tax Administration (ESTV) generally allows two methods for converting foreign currencies into CHF:

1. Spot rate on the date of tax accrual (typically the invoice date or the date of payment receipt)
2. Monthly average rate according to the ESTV's published monthly foreign exchange rates

Important: Once chosen, your method must be applied consistently and uniformly to all tax periods. Switching methods mid-project creates differences that are hard to explain — both to your client and to your accountant.

For VAT accounting on accrued income (which many SMEs below the CHF 5 million turnover threshold choose), the date of actual payment is decisive. This means: if your advance payment arrives in your account on 14 October, the 14 October rate applies — not the date on the invoice.

Practical Example: Advance Invoice in EUR

A Swiss web designer agrees with a German client on a project valued at EUR 8,000. The contract specifies a 40% advance payment.

Step 1 — Issue the advance invoice:

• Amount: EUR 3,200 (40% of EUR 8,000)
• VAT 8.1% on EUR 3,200 = EUR 259.20
• Gross: EUR 3,459.20

Step 2 — Payment received on 3 November:

• EUR/CHF rate on 3 November: 0.9450
• CHF equivalent: 3,459.20 × 0.9450 = CHF 3,268.94
• This amount is recorded as incoming payment in the CHF accounts.

Step 3 — VAT reporting:

• VAT portion in CHF: 259.20 × 0.9450 = CHF 244.94
• This amount flows into VAT reporting for Q4.

Step 4 — Final invoice (2 months later):

• Remaining amount: EUR 4,800 + VAT EUR 388.80 = EUR 5,188.80
• Rate on payment receipt: 0.9310
• CHF equivalent: EUR 5,188.80 × 0.9310 = CHF 4,830.80

Total CHF receipts (CHF 3,268.94 + CHF 4,830.80 = CHF 8,099.74) differ from the theoretical total at a fixed rate — this is normal and not an error, provided the rate is correctly documented each time.

Booking Currency Differences: Account 6960

Currency differences from completed transactions belong in the Swiss chart of accounts (SME) on account 6960 Currency losses or 3960 Currency gains (numbering may vary by plan). They are profit-and-loss items and appear in the income statement.

Typical scenario: The CHF amount recorded on the advance payment differs from the CHF equivalent of the final invoice amount. The difference is booked out as a currency gain or loss when the receivable account is settled.

Many accountants recommend tracking foreign currency amounts on the receivable account in the original currency and converting only when payment is received. This greatly improves traceability.

What Must Appear on an Advance Invoice in Foreign Currency

An advance invoice in EUR must contain the same mandatory fields as any other invoice — our guide to Swiss invoice template requirements covers these in detail. Additionally, for foreign currency invoices we recommend:

• Currency clearly and unambiguously stated (e.g., "EUR" not just "€")
• Clear VAT rate in the invoice currency
• Optional: Reference rate on the invoice date (helps your customer with their own booking)
• Bank details in the original currency, if available (EUR IBAN)

Warning: The Swiss QR-bill is exclusively for CHF amounts. If you issue an invoice in EUR, you do not use a QR-bill, but rather a standard IBAN transfer or SEPA direct debit. For more on QR-bill specifics, see our step-by-step guide to creating a Swiss QR-bill.

VAT Rate: Which One Applies?

It depends on the type of service, not the currency:

Service Type	VAT Rate 2026
Standard (consulting, IT, services)	8.1%
Accommodation	3.8%
Food, books, medicines	2.6%

Currency has no bearing on the applicable tax rate. A consulting service for a German client follows the same rules as for a Swiss client — provided the service is delivered in Switzerland.

Common Mistakes with Advance Invoices in Foreign Currency

• Inconsistent rate application: Using spot rate one moment, monthly average the next — this creates unexplainable differences in reporting.
• Stating VAT in CHF while the invoice is in EUR: This confuses your customer and can cause accounting problems. Stay consistent in the invoice currency.
• No exchange rate documentation: Without a recorded rate on the payment date, a VAT audit becomes unnecessarily complicated.
• Using QR-bill for EUR amounts: This is not technically permitted.
• Forgetting currency differences: Small amounts accumulate across many projects and distort year-end results if not properly booked out.

With the SnapBill app, you can create advance invoices in various currencies; the conversion and rate documentation remain your accountant's or bookkeeper's responsibility.

At a Glance

• The VAT-relevant conversion date for accrued income is the day the payment is received.
• The ESTV accepts spot rate or ESTV monthly average rate — but consistently across all periods.
• Currency differences belong on a separate account (currency losses/gains) and are profit-and-loss items.
• QR-bills work only in CHF — EUR invoices use standard IBAN transfers instead.
• Document all rates on the payment date: this saves time in audits and year-end closing.