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Switzerland Extends VAT Perk For Hoteliers

by Ulrika Lomas,, Brussels

25 January 2013

The Swiss Federal Council has recently approved plans to extend until 2017 the special value-added tax (VAT) rate of 3.8% accorded to the hotel industry for accommodation services.

The decision is in accordance with an initiative submitted by the Committee for Economic Affairs and Taxation (CEAT) of the Swiss National Council.

Introduced in 1996, the special VAT rate benefiting the hotel industry, currently in force until the end of 2013, has already been extended four times. The last time was within the framework of the total revision of Switzerland's VAT law.

On December 21, 2011, the Swiss National Council rejected plans for the introduction of a single VAT rate, as recommended by the Federal Council. The National Council requested instead that the future VAT model be based on two VAT rates.

Consequently, in accordance with the reform, the hotel sector will in future be subject to a reduced VAT rate and will no longer benefit from a special VAT rate. However, given the need to modify the constitution, necessitating the approval of both the Swiss people and cantons, the new model is not expected to enter into force before 2016.

As an interim measure, it was agreed that the current special VAT rate be extended.

According to the Swiss Federal Department of Finance (FDF), this decision will lead to a shortfall of tax revenue of CHF180m (USD193m) a year, representing a total shortfall of EUR720m over four years. Given the size of the sum, the measure will have to be compensated by a reduction of expenditure or by a rise in taxes, the FDF states.

TAGS: tax | value added tax (VAT) | law | tax rates | Switzerland | services

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