Anyone who consumes something in Switzerland must make a financial contribution to the state. To prevent every consumer from having to settle VAT with the state for every single purchase, the tax is levied on companies. The companies in turn levy the charge on consumers. This is done by including the tax in the price or listing it as a separate item on the invoice. Value-added tax (VAT) is used in Switzerland to cover general federal expenditure and is levied exclusively by the federal government. The charge is one of the state’s most important sources of revenue.
Definition of VAT
VAT is a general consumption and spending tax and is levied, for example, when purchasing products such as clothing, cars or food, as well as services such as hairdressing, transport or visiting a restaurant. When the customer pays for their product or service, VAT is already included. It is then the company that sold the product or service that must pay it to the state. VAT is usually abbreviated to MwSt or MWST.
Sales tax in Switzerland
The standard VAT rate in Switzerland was 7.7% until 31 December 2023. Since 1 January 2024 this rate has been 8.1%. This standard rate is applied to most goods and services, including clothing, technical devices and alcohol. A reduced tax rate of 2.5%, which has been increased to 2.6% since 2024, applies to essential goods such as food, non-alcoholic beverages, medicines, as well as newspapers and books. In addition, certain services and sectors such as healthcare, education, training and cultural activities are exempt from VAT in Switzerland. For overnight stays including breakfast, a special rate of 3.7% was charged until the end of 2023, which has risen to 3.8% since 2024. This rate is regularly reviewed and extended by parliament.
Overview of VAT rates from 2026
The VAT rates will remain unchanged in 2026:
| Category | Tax rate from 01/01/2026 |
|---|---|
| Standard VAT rate | 8.1% |
| Reduced VAT rate | 2.6% |
| Special rate for accommodation | 3.8% |
Changes to net and flat tax rates from 2026
The net and flat tax rates (SSS and PSS) remain unchanged:
| Net and flat tax rates (SSS/PSS) | Tax rate from 01/01/2026 |
| 1st rate | 0.1% |
| 2nd rate | 0.6% |
| 3rd rate | 1.3% |
| 4th rate | 2.1% |
| 5th rate | 3.0% |
| 6th rate | 3.7% |
| 7th rate | 4.5% |
| 8th rate | 5.3% |
| 9th rate | 6.2% |
| 10th rate | 6.8% |
Turnover and tax liability thresholds for applying the net tax rate method from 2026
The changes to the turnover and tax liability thresholds are as follows:
| Parameter | Until 31/12/2024 | From 01/01/2026 |
| Turnover threshold | CHF 5'024'000 | CHF 5'005'000 |
| Tax liability | CHF 108'000 | CHF 108'000 |
These changes to the net and flat tax rates (SSS and PSS) do not allow an early switch to the effective settlement method. A switch from the effective method to the net or flat tax rate method is only possible once the waiting period in accordance with Article 37 paragraph 4 MWSTG or Article 98 paragraph 2 MWSTV has expired.
New regulations from 2026
In addition, the following changes will come into force:
- Annual VAT return for companies with annual turnover of up to CHF 5'005'000 (application required by 28 February 2026, quarterly advance payments remain in place).
- Platform taxation: Online platforms will be liable for VAT on sales processed via them.
- Changes for streaming services: The place of supply will now be determined by the recipient’s place of residence.
- Reduction of the value exemption limit for tax-free purchases abroad from CHF 300 to CHF 150 per person and day.
- Tax exemptions for cultural events and medical treatments.
- Emission rights and certificates: Trading in emission rights is subject to the reverse charge tax, including for domestic transactions.
- Extension of the portal obligation for certain VAT areas (from 1 January 2027).
- Adjustments to the net and flat tax rate method: Changes to the requirements for eligible companies.
- Certain hygiene products: The adjustment of the reduced tax rate now explicitly includes menstrual hygiene products.
Impact of the VAT increase on companies from 2024
The increase in VAT rates that came into force in 2024 has significant implications for companies in Switzerland. These affect reporting cycles and payment deadlines, as the applicable tax rate depends on the time the service is rendered and not on the date of invoicing or payment. This can particularly affect invoices issued in 2023 that fall wholly or partly within the service period of 2024. Companies must adapt their accounting systems and business processes to the new VAT rates, which may require updates to sales and billing systems.
Practical implementation from 2024
Companies must categorize their services and determine when the first settlements with the new tax rate must be made. It is important that companies comply with the new legal requirements in order to avoid potential legal consequences. The VAT increase in Switzerland brings major changes for companies. It is important that companies respond to these changes now and adapt their systems and processes accordingly. They should seek support from tax advisors to ensure that they meet all legal requirements and avoid any possible legal consequences.
Difference between VAT and sales tax
VAT has existed in Switzerland since 1 January 1995. At that time, the Swiss Federal Council initially set two tax rates. Before 1995, a so-called turnover tax on goods (WUSt) was levied on goods and services. Nowadays, the use of the terms sales tax and value-added tax depends on the perspective. Consumers are generally more familiar with the term value-added tax, while companies tend to use the term sales tax (Umsatzsteuer). Sales tax is derived from the revenues generated and is regarded as an umbrella term for this type of tax.
How does input tax deduction work?
Consumers are initially not affected by the so-called input tax deduction under the Swiss VAT system. For companies, however, the input tax deduction offers an advantage: they save money because they only have to pay VAT to the state on their sales, not on their purchases. That is why net prices plus VAT are customary in business. By offsetting VAT and input tax, companies can recover their expenses. Consumers do not have this option. If a company has already paid the standard VAT rate of 8.1% on products when importing them, it can deduct the tax collected on resale to the consumer. Input tax is therefore incurred before a company has sold its products and services and collected VAT. In this way, a company can deduct VAT as input tax on purchases. In addition, companies can also deduct VAT on all other services they have purchased – for example, costs for transport vehicles, properties and storage materials.
Example of input tax deduction
The calculation of input tax becomes clearer with an example: A dressmaker buys fabric worth 100 francs. She pays a weaving mill 108.10 francs for it (VAT: 8.10 francs; VAT rate 8.1%). She then uses the fabric for a customer order, which she charges at 270.45 francs (incl. VAT) (VAT: 20.45 francs). To offset excessive taxation, also known as tax accumulation, she may deduct the input tax from the Federal Tax Administration: that is, the VAT she paid when purchasing the fabric (8.10 francs). As a result, for this order the dressmaker pays only 12.35 francs in tax.
Who is liable for VAT?
In principle, all companies are subject to VAT, regardless of their legal form. The prerequisite is that their annual turnover exceeds 100,000 francs. The companies are then obliged to register with the Federal Tax Administration and settle their turnover annually. Upon registration, they are assigned a VAT number. Foreign companies that generate turnover in Switzerland are therefore also liable for VAT. This requires a tax representative or a Swiss address for foreign taxable legal entities. Such representation is also provided by Auditrium.
Who is exempt from VAT?
If a company’s turnover from taxable services, such as deliveries and services, is less than 100,000 francs within one year, the company is exempt from VAT. For non-profit sports and cultural clubs as well as charitable institutions, this threshold is 150,000 francs.
How is VAT settled?
Once a company has registered with the Federal Tax Administration, it is assigned a VAT number. Companies are guided through registration online. The administration clarifies VAT liability and companies must state how they want to settle their VAT.
In addition to registration, VAT returns are usually submitted electronically via the online reporting tools of the Federal Tax Administration. Companies can choose between the tools ESTV-SuisseTax and MwSt-Abrechnung easy. The majority of taxable companies report on a quarterly basis using the agreed consideration method, because this system is based on their accounts receivable and accounts payable accounting.
What is the UID number?
Every company in Switzerland has a business identification number, abbreviated as the UID number. It can be queried online. Together with the suffix MwSt, the business identification number forms the VAT number. Companies must state the new VAT number on their invoices in the following form: CHE-123.456.789 MwSt. The UID number replaced the old six-digit VAT number in 2014.