Swiss parliament agrees 0.4% VAT rise for pension funding
The National Council and Council of States parliamentary houses agreed on 19 June 2026 to a 0.4% VAT increase, taking Switzerland’s standard VAT rate from 8.1% to 8.5%.
The move is intended to help fund the country’s new 13th monthly state pension payment approved by voters in March 2024. There will be a public referendum on the rise in November 2026.
2028 standard VAT rate rise; no change to reduced rate; hotel rate rise to 4%
If approved in the Refendeum, the increase would take effect from 1 January 2028. The 2.6% reduced rate will remain unchanged on food and essentials, but the hotel VAT rate will rise from 3.8% to 4%.
The original proposal for a 0.7 % VAT increase was expected to raise around CHF 4.2 billion annually to help finance the additional pension payment. The revised proposal would generate only CHF 1.5 billion.
Disagreement remains over pension contributions
While both parliamentary chambers are maw aligned on the 0.4% VAT increase, disagreement remains over how the pension reforms should be financed.
The Council of States supports a permanent VAT increase of 0.4% together with a 0.2% increase in employee and employer pension contributions. The National Council continues to oppose the payroll contribution increase.
The National Council had also proposed limiting the VAT increase until 2033, whereas the Council of States favours a permanent increase.
Switzerland last increased its VAT rate on 1 January 2024, from 7.7% to 8.1%, to help fund earlier pension reforms. Even after a further increase to 8.5%, Switzerland would continue to have one of the lowest standard VAT rates in Europe, compared to an EU average of more than 21%.
Following the March 2024 referendum approving a 13th monthly state pension payment, the Swiss government proposed a VAT increase to help finance the measure.
1st Jan 2024 VAT rise to fund pension reforms for ageing population
An ageing population, and funding shortage in the public pension system (OASI), has led to the Swiss to vote in September 2022 for a rise in VAT rates from January 2024 as follows:
- Standard rate from 7.7% to 8.1%;
- Reduced rate from 2.5% to 2.6%
- Hotel accommodation rate from 3.7% to 3.8%
The vote for the increase in Value Added Tax received 55.1% of the vote. The rise will only remain in place until 2030.
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Package of reforms triggers national referendum
Since the VAT rate change was linked to other measures to change the benefits package, and therefore a change to the Federal Constitution, a national referendum was required – hence today’s vote.
The extra revenue would be applied to cover shortages on the Swiss Old Age Insurance contribution which falls short of the ongoing payments. This is being exacerbated by the wave of Baby Boomer generation (born between 1946 and 1964) now retiring.
As part of the reforms, women will work longer – to 65 years instead of 64.
Read our Swiss VAT guide for more background on Switzerland’s Value Added Tax regime.
Second attempt to raise Swiss VAT to fund pensions
Back in 2017, the Swiss voted against a VAT rise to fund a pension reform package. The rate then was 8%, and the vote proposed 8.3%. So instead a planned cut to the current 7.7% went ahead on 1 January 2018.
