VAT: luxury goods, property, standard rate... What you need to know about VAT in Switzerland

Value Added Tax – or VAT – is a well-known concept, but its specifics are sometimes unclear or difficult to understand for consumers and professionals alike. Standard-rate VAT, reduced-rate VAT, VAT on luxury goods, VAT on accommodation or property… The rules are not always the same. Let’s take a closer look at this concept, which is so common in everyday Swiss life, and the different rates you need to be aware of.

What is VAT?

Value Added Tax (VAT) is an indirect consumption tax levied on goods and services consumed or used in the countries that apply it. Paid by the final consumer, VAT is collected by taxable businesses, which then pass it on to the public authorities.

VAT applies to various types of transaction:

– Transactions subject to VAT by their nature. These are transactions (supply of goods or services) carried out for remuneration by a taxable person (who carries out an economic activity independently on a regular basis).

– Transactions subject to a special legal provision. These may include the sale of movable capital goods (fixed assets) entitling the seller to deduct VAT, the sale of immovable property (within 5 years of completion), imports, intra-Community acquisitions or self-supply (LASM) in certain specific cases.

– Exempt but taxable transactions. In the case of exports, the letting of bare property for business use, or certain banking transactions, it is possible for the transaction to be subject to VAT despite the theoretical exemption.

It should be noted that, apart from exemptions, transactions not listed by law are considered to be non-taxable. For example, interest for late payment, dividends, subsidies, or even sales not made by a taxable person (such as property sales made by a private individual) fall outside the scope of VAT.

Within the European Union, the standard rate of VAT cannot be lower than 15% and the reduced rate must be higher than 5% (excluding the ‘super-reduced’ rate applied by certain countries such as France, Ireland, Spain, Italy and Luxembourg). That said, rates vary from country to country, reflecting the economic environment and political priorities of each Member State.

How does VAT work in Switzerland?

VAT – or value-added tax – is a tax on consumption. All goods and services purchased and consumed in Switzerland are subject to this tax, with a few exceptions. Different rates are applied depending on the category of purchase. A distinction is made between standard VAT, reduced-rate VAT and special-rate VAT. Depending on the conditions, the rate can be between 0% and 8.1%. There are also questions about luxury VAT, property VAT, etc.

Note that only companies or organisations with an annual turnover in excess of CHF 100,000 are required to pay VAT. If your turnover is below this amount, you may choose to pay VAT voluntarily, but you are not obliged to do so.

The normal amount of VAT in Switzerland

In Switzerland, the “standard” VAT rate is 8.1%. It applies to goods and services that are not subject to the reduced or special rate, i.e. most of them.

Reduced-rate VAT

In Switzerland, a reduced rate of VAT is applied to a number of products and services. This is 2.6% instead of the usual 8.1%.

The goods concerned include not only basic necessities (including, more recently, feminine hygiene products), but also most food products, with the exception of alcohol, for which the normal VAT rate of 8.1% applies.

Although restaurants are taxed at 8.1%, takeaway meals benefit from reduced-rate VAT.

Medicines, newspapers, books, magazines and other non-advertising printed matter, as well as services offered by radio and television companies, are also taxed at 2.6%.

Special-rate VAT

The accommodation sector is subject to a special VAT rate of 3.8%. Hotels, for example, are required to apply this rate when they charge for overnight stays and breakfasts.

Luxury VAT: the standard rateapplies

Although some European Union countries have raised the possibility of applying a special luxury VAT rate, this is not the case in Switzerland. The tax system is the same for works of art. VAT on luxury goods will therefore remain at 8.1% in 2024, a much lower rate than that applied in most European countries.

What aboutreal estate?

Determining the amount of tax to expect is an important part of any property purchase. These taxes vary from canton to canton, but certain rules apply in all cases.

In this case, the supply and rental of real estate is exempt from value added tax, as it is excluded from the scope of the tax. This is the default regime, which applies when the transfer of the property is not accompanied by any specific contractual indication.

However, registered businesses and individuals may choose to make a property sale subject to VAT, thereby making the input VAT relating to the acquisition, improvement and maintenance of the property in question deductible. It should be noted, however, that this exemption can only be granted if the property is used exclusively for residential (private) purposes. The value of the land must be included in the contract and excluded from the calculation.

The services offered by estate agents, on the other hand, are taxed in the same way as any other service, at 8.1%. When you buy a property, you can therefore expect to pay VAT on agency fees. These are expressed as a percentage of the sale price. The broker will inform the seller of this when estimating the property, and the buyer when negotiating.

0% VAT: in what cases?

Apart from the turnover quotas, certain products and services are exempt from VAT in Switzerland. As we have seen, this is particularly the case for the sale of real estate, but the exemption also applies to rental.

Health, culture and education are not subject to VAT either.

FGP Swiss & Alps, a luxury real estate agency specialising in exceptional properties in Switzerland and the French Alps, assists buyers and sellers at every stage of their transactions. Our in-depth knowledge of these regions enables us to provide our clients with clear information and advice tailored to their specific situation. Whether you want to find out more about property taxation, sell your property or find the home of your dreams, our approach, based on proactive listening and an authentic vision, will bring you satisfaction.

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