Reduced VAT rate: When is it applicable?

The reduced tax rate is 2.5% and thus significantly lower than the standard rate of 8%. In practice, however, there are always questions about when the reduced rate is applied.

Reduced Tax Rate

According to Art. 25 para. 1 of the Value Added Tax Act, a normal tax rate of 8% applies in Switzerland. The exceptions in which a reduced tax rate is used can be found in para. 2 of this legislative article. The following services benefit from the lower tax burden:

• Food
• Grain
• Fertilizers
• Medications
• Newspapers, magazines, books, and other printed products

These and other services can benefit from the reduced tax burden.

Special Case of Catering Services

In the catering sector, caution is advised. Services that are provided in a normal restaurant setting (such as a meal) are taxed at the standard rate of 8%. However, if only a vending machine is offered, or if the food is intended for takeout or delivery, then the reduced tax rate applies.

A simple example is a pizzeria. If it has tables for guests and they consume the pizza at these tables, then the normal tax rate is used. However, if the pizzeria consists only of a pizza oven and sells its products only across the street, then the reduced value-added tax rate can be paid. It is important that if it is intended to charge the reduced rate, no measures are taken that allow customers to consume the products on-site. Therefore, do not provide tables or standing tables, otherwise, you would be considered a normal restaurant and be subject to the normal value-added tax rate.

If this is disregarded, it is possible that high value-added tax demands could be made, because, for example, the pizzeria has provided normal catering services and not just had a take-away characteristic. It is advisable to carefully determine whether the reduced rate or the standard rate applies, otherwise high tax demands are threatened.