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Switzerland: VAT To Be Increased, Based on Citizens’ Vote

On September 25, 2022, the Swiss held a referendum which covered two questions: the potential VAT rate increase and the pension age for women.

The two questions are Switzerland’s benefits package, described in the country’s Federal Constitution. Therefore, the votes were carried out via a national referendum.

The need to vote on the VAT increase comes from the current pension funding shortage – the result of the ageing population and the Baby Boomer generation currently retiring. With fewer young people to cover current pension payments, Swiss Old Age Insurance Contributions lack funds. The country plans to use the extra revenue from VAT collected on the said payments.

This is the second time this tool has been considered to solve the pension shortage. In 2017, the Swiss voted against the Value Added Tax increase. Instead, the tax rate was lowered from 8% to 7.7%/

In the referendum, the Swiss citizens voted in favour of raising VAT rates, with 55.1% of the vote supporting the initiative. As of January 2024 or perhaps even earlier, until 2030, the standard VAT rate would be increased from the current 7.7% to 8.1%, and the reduced rate would be only slightly raised from 2.5% to 2.6%. A special hotel accommodation rate would also increase by one percentage point, to 3.8%.

The exact VAT raise implementation date is yet to be formalised by Swiss tax authorities – the SFTA.

The second question of the referendum, the working age of women, was also supported in favour of solving the current pension shortage. Based on the vote, women’s working age will increase from 64 to 65 years old.

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