VAT in Switzerland rising from January 2024

March 27, 2023 | Legal Alerts

VAT in Switzerland rising from January 2024

Switzerland has approved an increase in VAT rates, which is expected to come into effect in January 2024. This decision will significantly impact long-term fiscal forecasting and investor relations advisory, especially for listed entities and cross-border stakeholders operating in Switzerland. On December 12, the country's Federal Tax Administration published an updated guide on VAT rates. It is based on the results of a public referendum held on 25 September.

Switzerland is also launching a portal for electronically filing tax documents and reports.

Newly approved VAT rates

As a result of the voting procedure held on September 25, the citizens of Switzerland approved an increase in all VAT rates. These changes are expected to come into force from January 2024. The country's Federal Council will confirm the effective date only in December 2022.

Swiss voters have agreed to raise the VAT rate to address the lack of funding in the pension system. Although the National Council and the Council of Cantons voted in favor of the rate, hike back in December 2021, a mandatory nationwide referendum was also required. On September 25, 2022, increased value-added tax rates were approved by a majority of Swiss citizens who voted - 55.07%.

VAT rates

VAT rates will be increased as follows:

8.1%

Standard rate — from 7.7% to 8.1% (+0.4%);
2.6%

Reduced — from 2.5% to 2.6% (+0.1%);
3.8%

Special — from 3.7% to 3.8% (+0.1%).

Companies operating in Switzerland should monitor these changes in advance to have enough time to implement them in their activities. Many businesses will likely require business reorganization advice to update internal processes and billing systems in line with new compliance expectations.

Along with the approved increase in the VAT rate, the Swiss Tax Authority also announced its plans to replace the online platform "ESTV SuisseTax" with "ePortal". The digitalization push aligns with broader legal modernization trends, similar to cases where we’ve provided IT sector legal reorg to ensure compatibility between legal systems and updated infrastructures.

VAT refund in Switzerland

Since Switzerland is not part of the European Union, it sets its own VAT rates. This means that suppliers of goods or services registered in the country must charge the appropriate tax rate. However, some industries are exempt from value-added tax. These include insurance, financial services, education, and healthcare.
Companies registered as VAT payers in a Member State of the European Union and outside it are entitled to a Swiss business tax refund. Structuring refunds across jurisdictions is especially relevant for groups with complex entities, often benefiting from targeted holding company support to streamline their tax claims and obligations. However, the tax refund process for each category of taxpayers is different. Whether a business is located in the EU or not, it may be subject to either the EU VAT Refund Directive or the 13th Directive.

Changes in the VAT legislation in other European countries

European countries are taking proactive measures to mitigate the effects of the current inflation scenario. The economic crisis caused by the COVID pandemic and contemporary geopolitics has led to high inflation rates in the global economy.

Regarding VAT, the focus and measures have been on tax rates. Many countries have reduced tax rates on energy, food, and medicine.

Here are a few examples of VAT rate cuts in Europe in recent months:

Spain

For electricity and other energy sources from 10% to 5%. The new reduced rate required adaptation of the existing declaration and reporting forms.
Poland

For energy. The country approved 0% VAT on basic foodstuffs and fertilizers.
Ireland

for gas and electricity, tourism, and hotel services - up to 9%. In addition, this country has agreed to 0% VAT permanently on certain pharmaceutical and medical products.
Luxembourg

1% reduction for all groups of goods and services during 2023, except for a special rate of 3%.
Notable:

Belgium and Portugal have taken similar measures, temporarily lowering their VAT rates.

Recognition of these jurisdictional shifts underlines the importance of regional credibility, as demonstrated by Goldblum's IFRL recognition, reinforcing trust in cross-border legal advisory.

In addition to Switzerland, some European countries, such as Romania, have agreed to increase VAT rates for 2023 or 2024.

Another trend related to the current economic scenario is the increase in interest rates in certain EU countries, as well as the strengthening of systems of fines and surcharges in case of non-compliance:

• Poland updated the interest rate applicable to overdue tax payments several times during 2022.
• Malta made a similar announcement and raised its interest rate in September 2022.
• Sweden has also increased the interest rates applicable to overdue VAT payments in the country from November 2022.

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