VAT increase for safety: proposed increase of 0.5 percentage points (cross-border guide)

Context

In a nutshell

• The Swiss Government has proposed an increase in VAT by 0.5 percentage points to finance arms purchases.
• The increase will be applied for 12 years and will be used exclusively for priority exits for armament.
• Additional revenue of CHF 24 billion will be used to deal with the most likely threats, such as hybrid activities and remote attacks.

The context

The Swiss Government has submitted a proposal to increase VAT by 0.5 percentage points to finance arms purchases. This increase will be applied for 12 years and will be allocated exclusively to priority exits for armament. The additional revenue of CHF 24 billion will be used to deal with the most likely threats, such as hybrid activities and remote attacks.

Motivations

The Swiss Government has motivated the proposal to increase VAT with the need to finance the purchases of armaments to ensure national security. According to the Government, the increase in VAT is necessary to deal with the most likely threats, such as hybrid activities and remote attacks. In particular, the Government cited the example of the 2015 San Bernardino attack, in which a terrorist killed 14 people and injured 11 others.

The impact on the economy

The increase in VAT could have a significant impact on the Swiss economy. According to a study by the Swiss Bank, the VAT increase of 0.5

Operational details

Key facts

• Swiss tax system at three levels: direct federal tax (DFI), cantonal tax and municipal tax.
• The proposal to increase VAT has been submitted by the Federal Council.
• The increase will be applied for 12 years and will be used exclusively for priority exits for armament.

VAT increase for safety: proposed increase of 0.5 percentage points

The Federal Council has presented a proposal for an increase in VAT to finance priority exits for security. The increase of 0.5 percentage points will be applied for 12 years and will be used exclusively for armament and security expenses.

How the Swiss tax system works

The Swiss tax system consists of three levels: the direct federal tax (DFI), the cantonal tax and the municipal tax. The IFD is a single tax that applies to all Swiss citizens, while cantonal tax and municipal tax vary depending on the canton and city where you reside.

For example, in Ticino, the cantonal tax is 10% on taxable income, while in Zurich it is 13%. In addition, municipal taxes vary by city and can be up to 10% of taxable income.

Concrete examples

A Swiss citizen earning CHF 60,000 per year in Ticino would pay the IFD of CHF 4,000, the cantonal tax of CHF 6,000 and the municipal tax of CHF 6,000, for a total of CHF 16,000 per year.

If the VAT increase of 0.5 points

Useful tools to protect your net income

To reduce FX leakage, compare CHF-EUR exchange options and banks for cross-border workers.

Key points

VAT increase for safety: proposed increase of 0.5 percentage points

The Swiss Government has presented a plan to increase the country's security, providing for an increase in VAT of 0.5 percentage points. This increase will be used to finance arms purchases and to deal with the most likely threats.

The context

Last year, the Swiss Parliament passed the Defence Act, which provides for an increase in defence spending of CHF 24 billion by 2030. This increase is intended to finance arms purchases and to deal with the most likely threats, such as the Ukrainian crisis and the growing tension between Russia and NATO.

# Increasing VAT

The VAT increase of 0.5 percentage points will apply from 1 January 2024. This means that VAT will increase from 7.7% to 8.2% for commercial transactions. This increase will be used to finance arms purchases and to deal with the most likely threats.

Concrete examples

For example, if a Swiss citizen buys a product that costs 100 francs, the VAT will go from 7.7 francs to 8.2 francs. This means that the Swiss citizen will have to pay an extra CHF 0.5 for the same product.

References to Swiss cantons or cities

The VAT increase will be applied in all Swiss cantons and cities. For example, in Zurich, the price of a 5-franc coffee will go from 0.38 VAT francs to 0.41 VAT francs. In Geneva, the price

Check tax deadlines for cross-border workers: returns, Swiss declarations, rebates — all dates in one interactive calendar.

Source: laregione.ch