Reduction of VAT rates - what you need to know!

In 2011, the VAT rates were raised to the current level as part of the additional financing for IV. This temporary increase ends on January 1, 2018. However, had the Pension Provision Reform 2020 been accepted, the reduction would not have been carried out. Since this reform was rejected by the people and the cantons, there will still be a reduction of the VAT rates as of January 1, 2018. In addition, an adjustment of the balance tax rates will also be made on the same date.

Current VAT rates

‍In Switzerland, there are three different VAT rates. The standard rate is currently 8.0%, the special rate for lodging is 3.8%, and the reduced rate is 2.5%. These rates have been in effect since 2011. A portion of each rate is used for the additional financing of IV. For the standard rate, this is 0.4 percentage points, for the special rate, it is 0.2 percentage points, and for the reduced rate, it is 0.1 percentage points.

‍Development of VAT rates

‍The portions of the tax rates for the additional financing of IV will be abolished as of January 1, 2018. However, all three VAT rates will also be increased by 0.1 percentage point as of January 1, 2018. This was decided by the people and the cantons in a referendum on February 9, 2014. This increase serves to finance the expansion of the railway infrastructure (FABI). Moreover, it was planned, under the Pension Provision Reform 2020, to raise the tax rates back to the currently valid level. With the rejection of the Pension Provision Reform 2020, this plan will not be implemented. Thus, the following adjustments to the VAT rates will occur: Standard RateSpecial RateReduced RateCurrent VAT rates8.00%3.80%2.50%./. expiring portion for IV additional financing (as per 12.31.2017)-0.40%-0.20%-0.10%+ additional portion for FABI (from 01.01.2018)0.10%0.10%0.10%Status as of 01.01.20187.70%3.70%2.50%

‍Effects on SMEs

‍The first reduction of VAT in Swiss history can have significant effects on SMEs. This may affect, for example, accounting software. Depending on the provider and product, everything may be handled with an update. Otherwise, it may be necessary to manually adjust the VAT rates, for instance, on all invoice templates or in the Excel tables that are affected.

‍Reductions in balance tax rates

‍Balance tax rates help to simplify the settlement with the Federal Tax Administration (ESTV). If balance tax rates are used, input tax does not need to be determined. Instead, the gross revenue, including taxes, is multiplied by the balance tax rate approved by the ESTV. This option is only available to companies generating a maximum turnover of 5.02 million Swiss francs. For each industry or activity, the balance tax rate they are allowed to use is defined in the Ordinance. These rates are now being adjusted. Of the ten possible rates, eight were reduced. Previous ratesRates as of January 1, 20180.1%0.1%0.6%0.6%1.3%1.2%2.1%2.0%2.9%2.8%3.7%3.5%4.4%4.3%5.2%5.1%6.1%5.9%6.7%6.5%Which industries are specifically affected can be read in the advance print of the new Ordinance. Findea helps you keep your taxes simple and unproblematic.