Senate calls for Federal Council 0.5% rise to be reduced to 2%
10 September 2026: the Senate’s Security Policy Committee (SIK-S) voted against the Federal Council’s proposed 0.5% VAT rise to fund additional military defence spending. Instead, it is calling for a 0.2% rise. The Senate will decide on the matter this autumn.
On 12 August, the Federal Council approved legislation proposing a 0.5% temporary increase in VAT rate to 8.6% from 2028 for a period of 12 years.
Separately, a Swiss VAT rise of 0.4% for Pensions: the National Council approved 17 June 2026, a VAT increase from 8.1% to 8.5%. This rise needs further referendum in 2027.
Under the Federal Council proposal:
- standard VAT would rise from 8.1% to 8.6% (+0.5%)
- the special accommodation rate would rise from 3.8% to 4.1% (+0.3%)
- the reduced rate of 2.6% for essentials including food and medicines would remain unchanged
- the increases would apply from 2028 for 12 years
- the measure could not be extended without another referendum
- all additional revenue would be ring-fenced for defence spending.
The measures remain subject to parliamentary approval and Switzerland’s mandatory referendum process before taking effect.
Taxes for additional fighters, missiles and defence systems
The additional revenue would be ringfenced exclusively for military expenditure, including the rising costs of the country’s Patriot missile system, the acquisition of US F-35 fighter aircraft, development of the Swiss Army’s defence capabilities and the possible purchase of a second ground-based air defence system.
2028 Pension-driven VAT approved rise from 8.1% to 8.5%
Following a public referendum in April 2024, Swiss voters approved reforms to increase state pensions, including the introduction of a 13th monthly pension payment. To fund this commitment, the National Council confirmed a 0.7% VAT increase, raising the standard rate from 8.1% to 8.7% – but the National Council reduced this rise to 8.5% in June 2026.
The measure is expected to generate approximately CHF 4.2 billion in additional annual revenue. Although initially scheduled for 1 January 2026, the increase could not be implemented in time due to parliamentary constraints. Authorities now indicate 1 January 2028 as the most realistic implementation date – subject to 2027 referendum.
This follows Switzerland’s most recent VAT increase on 1 January 2024, when the standard rate rose from 7.7% to 8.1%, also to address pension funding gaps.
Political sensitivity and business impact
While Switzerland still has one of the lowest standard VAT rates in Europe (the EU average exceeds 21%), businesses now face high visibility VAT reform risk, particularly if both pension and defence measures converge around 2028.
For businesses operating in Switzerland, this reinforces the need for:
- VAT rate-change readiness
- pricing and contract reviews
- tax engines and ERP systems capable of handling staged and conditional rate changes
See more in our Swiss VAT guide.
