Towards an increase in VAT for defence (cross-border guide)

Context

In a nutshell

• The Government maintains the proposal of an increase in VAT of 0.5 percentage points for a period of 12 years.
• The increase will be applied from 2028.
• The increase will not affect food and drugs.

Key facts

• What: Increase in VAT for defense.
• When: From 2028 for 12 years.
• Where: Switzerland.
• Who: Federal Council.
• Amount: 0.5 percentage points.

The Federal Council has decided to maintain the proposal for a temporary increase in VAT, in order to strengthen the country's security and defence. The increase in question, to the extent of 0.5 percentage points, would be applied from 2028 and for a period of 12 years. The choice is motivated by the deterioration of Switzerland's geopolitical situation and the savings measures of recent years, which have created critical issues for the army.

The Federal Council has carefully assessed the situation and decided to increase the tax burden to finance the country's defence. This decision was taken taking into account the needs of national security and the need to ensure the protection of Swiss citizens.

What does it mean for the Swiss?

• Economic impact: Increasing VAT by 0.5 percentage points would mean a 0.5% increase in the price of many goods and services. This means that a product that currently costs 100 Swiss francs will cost 105 Swiss francs.
• Concrete examples: A coffee that currently costs 5 Swiss francs will cost

Operational details

Towards an increase in VAT for defence

The VAT increase will be applied from 2028 and for a period of 12 years. The increase will not affect food and drugs, in order to mitigate the repercussions on low-income families. The normal rate (8.1%) will temporarily increase by 0.5 percentage points, while the special rate (3.8%, applied to the hotel sector) will be increased by 0.3 percentage points. The reduced VAT rate (now 2.6%) will not be adjusted.

The Swiss Government has announced that the VAT increase will be used to finance national defence. This means that Swiss citizens will have to pay a little more for goods and services, but in return they will be able to feel more secure and protected.

But how exactly will the VAT increase work? And what will be the consequences for families and businesses? Here is some useful information to better understand the situation.

How does the VAT increase work?

The VAT increase will be applied from 2028 and for a period of 12 years. During this period, the normal rate (8.1%) will temporarily rise by 0.5 percentage points, from 8.1% to 8.6%. The special rate (3.8%, applied to the hotel sector) will instead be increased by 0.3 percentage points, from 3.8% to 4.1%. The reduced VAT rate (now 2.6%) will not be adjusted.

Concrete examples

To better understand how the VAT increase works, here are some concrete examples.

• A citizen

Recommended tools

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Key points

Towards an increase in VAT for defence

The Swiss Government plans to create an Armaments Fund, where all the major revenues from the temporary VAT increase and a part of the army's regular budget will flow. During the duration of the Fund, all purchases of armaments - with the approval of Parliament - will be financed from it. The fund has the possibility to contract debts so that it can quickly make any advances, absorb spikes in payments and accelerate purchases. The debt is limited to a maximum amount of 6 billion and must be extinguished by the deadline of the temporary increase in VAT, in compliance with the debt brake.

The VAT increase is planned for a period of 2 years, starting from 1 January 2024. The rate will increase by 1.5% for all goods and services, except for food and basic services, which will remain exempt. The Government expects to raise about 4.5 billion Swiss francs per year with this increase.

The Armaments Fund will be managed by a committee composed of representatives of the Government, Parliament and the armed forces. The committee will be responsible for managing the fund and purchasing armaments and materials. Purchases will be made with maximum transparency and the widest participation of citizens.

How will the Fund work?

1. Creation of the Fund: the Government will create a special account

For a precise net salary calculation, use our tax comparator: compare take-home pay between G and B permits with all 2026 deductions.

Source: rsi.ch