Value-Added Tax Reform - Upcoming VAT Rate Adjustments in Switzerland

Josef Bergt
2023

Introduction

The fiscal landscape in Switzerland is poised for a transformative shift as the government has promulgated an increase in the rates of Value-Added Tax (VAT), effective from January 1, 2024. This article aims to elucidate these impending changes and their impact on various VAT accounting methods, and the broader implications for businesses and legal practitioners. It is imperative to note that these new VAT rates will be applicable for the first time in the third quarter of 2023, the second semester of 2023, and the month of July 2023, thereby necessitating an immediate and comprehensive understanding of the modifications. The VAT rate adjustments will also have effects on Liechtenstein’s VAT regime.

Incremental Changes in VAT Rates

The VAT rates in Switzerland and subsequently also in Liechtenstein will undergo the following alterations effective January 1, 2024:

• Standard Rate: An increment from 7.7% to 8.1%
• Reduced Rate: A marginal increase from 2.5% to 2.6%
• Special Rate for Accommodation: A slight adjustment from 3.7% to 3.8%

These changes will be reflected in the VAT accounting for the aforementioned periods in 2023, marking the first instance of their application in transactions reported to the tax authorities.

Consequences on Saldo and Lump-Sum Tax Rates

Adjustments in Saldo and Lump-Sum Tax Rates

The Saldo and Lump-Sum Tax Rates (in German SSS and PSS, respectively) will also experience modifications as follows:

• Rates ranging from 0.1% to 6.5% will undergo adjustments, with the most notable changes being in the higher brackets, such as an increase from 5.9% to 6.2% and from 6.5% to 6.8%.

Limitations on Transitions

It is crucial to underscore that these alterations in SSS and PSS do not authorize an expedited transition to the effective accounting method. Such a transition can only be undertaken upon the expiration of the waiting period stipulated in Article 37, Paragraph 4 of the VAT Act (MWSTG) and Article 98, Paragraph 2 of the VAT Ordinance (MWSTV).

Revenue and Tax Liability Thresholds for Saldo Tax Rate Method

The revenue and tax liability thresholds for employing the Saldo Tax Rate Method will also be revised:

• Revenue Limit: From CHF 5,005,000 to CHF 5,024,000
• Tax Liability: From CHF 103,000 to CHF 108,000

Conclusion and Key Takeaways

The impending VAT rate adjustments in Switzerland and Liechtenstein necessitate a meticulous reevaluation of existing accounting practices and legal frameworks. The changes are not merely numerical but carry implications for the choice of VAT accounting methods and compliance procedures.

Source: Swiss Federal Tax Administration, Increase in VAT tax rates as of January 1, 2024

Executive Summary:

• Incremental changes in Standard, Reduced, and Special VAT rates effective January 1, 2024. Current 7.7 % standard VAT rate will be raised to 8.1 % as of January 1, 2024.
• Adjustments in Saldo and Lump-Sum Tax Rates with limitations on methodological transitions.
• Revision in revenue and tax liability thresholds for employing the Saldo Tax Rate Method.