Switzerland Mulls Temporary VAT Exemption For Hotels

by Ulrika Lomas, Tax-News.com, Brussels

13 January 2012

In view of the strength of the Swiss franc, the Committee for Economic Affairs and Taxation (CEAT) of the Swiss National Council has called for the hotel industry in the Confederation to benefit from value-added tax (VAT) exemption for a temporary period of one year.

Following in-depth discussions with Economy Minister Johann Schneider-Ammann pertaining to the effects of the strong franc on the country’s industry, the committee narrowly voted in favour of the measure by 13 votes to 12.

The National Council CEAT has estimated that plans to exempt the hotel industry from value-added tax for a year will result in a shortfall of fiscal revenues for the Confederation of between CHF150m (USD159m) and CHF160m.

The value-added tax rate applied in the hotel industry in Switzerland is currently 3.8%.

The Swiss parliament must now decide whether or not to adopt the plans. During its winter session in 2011, the National Council narrowly adopted a motion instructing the Federal Council to present a draft for the VAT exemption.

The Swiss hotel association, hotelleriesuisse, welcomed the committee’s decision, underscoring that the measure would quickly and effectively reduce the burden on the Swiss hotel industry, resulting from the strong Swiss franc.

Hotelleriesuisse’s CEO Christoph Juen explained that the temporary targeted initiative would significantly improve the export capability of the Swiss hotel industry.

Dwindling investor confidence around the world, prompted by concerns over the eurozone debt crisis and by signs of a slowdown in the US, has led to massive increases in the Swiss franc, a 'safe haven' currency, over the past few months. The appreciation in the franc has particularly affected the competitiveness of businesses in Switzerland, faced with lower margins, particularly businesses selling their products abroad.

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