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On June 23, 2010, the Federal Counsel released its comments regarding the second part of the amendment of the Swiss VAT law. In our newsletter of July 30, 2009 we were already commenting the first part of the amendment, which already entered into force on January 1st, 2010.  

This second part entails mainly the introduction of a single VAT rate (versus currently three different rates), together with the abolition of numerous current exceptions (mainly in domains such as health, sport, mail and education).

The Federal Counsel proposes a rate of 6.5% (including the temporary increase of the VAT rate to finance the invalidity insurance - entry into force on January 1st, 2011). The 6.5% rate corresponds to the rate set by the Federal Counsel once VAT has been introduced in Switzerland more than 10 years ago...

This amendment is not without significant consequences. Notably, all healthcare services will newly be subject to VAT, which means that the final consumer will pay 6.5% in addition to the current service charge. In addition, health insurance premium will be increased by 3.1% to compensate this measure! Sport and education are also concerned by this amendment. Furthermore, food and non alcoholic drinks (currently taxed at 2.4%) will newly be subject to a rate of 6.5%. The only remaining exceptions will be in the fields of: 

• financial and insurance services
• Bet, lotery and hazard games
• Sale and rent of property
• Natural products (farm production)
• Services within the same public entity

The Federal Counsel justifies this anti-social measure by seeing a global reduction of the expenses of the tax payers due to this new VAT rate. One should nevertheless stay realistic: will in the end the tax payer really pay less? It is likely that the service providers and suppliers will not reduce their prices after the new rate is in force, leading globally to an increased tax charge of the tax payer. Recent similar measures in France have proven this scenario (reduction of the VAT rate in catering). Additional details on the position of the Federal Counsel can be obtained here (French version only)

The entry in force has not been set yet. The Federal Chambers will first examine the amendment proposal and the Federal Counsel will then have to adopt the ordinance and determine the entry in force. We can expect an entry in force on January 1st, 2012, though 2011 is still possible.

For any questions, please call Daniel Spitz.