Special hotel rate: the National opts for 2031

The National Council has finally opted for a compromise on VAT applied to the hotel sector. Having refused to consider the matter in June, the National Council reversed its position on Monday and agreed to extend the special rate for accommodation services, but only until 2031.

For hoteliers, property managers and tourism businesses, the stakes are very real. VAT directly affects advertised prices, profit margins, package deals, IT budgets and medium-term planning. In a sector where fixed costs are high and international competition puts pressure on rates, a change in the rate can quickly lead to commercial and accounting trade-offs.

A political ‘yes’, but limited in time

According to information reported by the Keystone-ATS news agency and published by watson.ch, the National Council has approved, by 102 votes to 86, an extension of the reduced rate applicable to the accommodation sector. This vote marks a U-turn: at first reading in June, the National Council had refused to consider the matter. The Council of States had opposed this, which brought the matter back before the National Council.

The majority backed a proposal put forward by Philipp Matthias Bregy, a National Councillor from the Valais Centre, supported by Le Centre as well as by a large majority of the SVP and the PLR. The debate did not, however, result in a long-term extension. Another proposal from the same MP, which sought to apply the special rate until 2035, was rejected. The compromise adopted sets the deadline at 2031.

This decision sends an important signal to businesses: the preferential regime will not be abolished in the short term, but nor is it considered a permanent fixture. For an SME in the hospitality sector, this means that it must factor in a period of relative stability, whilst avoiding basing business plans on the assumption that the current rate will necessarily be extended beyond the political deadline.

The bill was subsequently adopted in a vote on the whole by 101 votes to 86. The decision forms part of a wider debate on the role of sector-specific measures within the Swiss tax system, particularly when such temporary measures are extended on several occasions.

Why the hotel VAT rate remains a contentious issue

The standard VAT rate is 8.1 per cent, as watson.ch points out. The hospitality sector, however, benefits from a special rate for accommodation services. This scheme was introduced in 1996 as a temporary measure intended to support a sector then in crisis. Since then, it has been extended six times, with the latest extension dating from 2017 and running until the end of 2027.

VAT is a consumption tax. In principle, a taxable business charges VAT to its customer on the invoice and then pays it to the Federal Tax Administration, after deducting the recoverable input tax on its own purchases. In practice, the commercial impact depends on the market: when a hotel can pass on the VAT in full through its prices, the effect on its margin is limited. Where it cannot do so – because prices are constrained by online booking platforms, contracts with tour operators or cross-border competition – a rise in the rate may weigh on profitability.

It is precisely for this reason that the issue is a sensitive one. Hotel rooms are often sold at psychological price points, as seasonal packages or under pre-negotiated agreements. A change in VAT rates necessitates a review of price lists, terms and conditions, contracts, till systems, booking engines and accounting settings. For a small business, this adjustment takes up administrative time and may require the assistance of an accountant.

In establishments that combine accommodation, catering, seminars, spa facilities, car parks or the sale of ancillary services, even greater vigilance is required. Not all revenue is necessarily subject to the same VAT treatment. The issue is therefore not merely a matter of knowing the rate applicable to overnight stays, but of correctly classifying each service and documenting the breakdown on the invoice.

The Swiss Confederation highlights a high fiscal cost

The Federal Council opposed this extension. According to watson.ch, the reduced rate for the hotel sector represents a revenue loss of 300 million francs per year. Finance Minister Karin Keller-Sutter linked this figure to the army’s funding requirements, asking where savings would have to be made if revenue were foregone elsewhere.

Opponents also questioned the measure’s effectiveness. The committee rapporteur, Samuel Bendahan, a Socialist National Councillor from Vaud, emphasised that the 300 million would not benefit operators equally. According to figures cited during the debate, three-quarters of small and medium-sized hotels would receive only 10 per cent of this amount, whilst the 30 largest hotels, with a turnover of more than 50 million francs, would receive 59 million.

For SMEs, this argument is key. A uniform measure can have very different effects depending on size, positioning and customer base. An independent mountain hotel, a city-centre hotel belonging to a chain, a family-run inn or a very high-end resort do not have the same levers at their disposal. The benefit derived from the special rate depends on the turnover in question, the ability to maintain prices, seasonality and the proportion of costs on which input tax can be reclaimed.

Another point was raised in the debate: Emmanuel Amoos, a Socialist National Councillor from Valais, pointed out that the sector has recorded 44 million overnight stays, a new record. For some elected representatives, this dynamism weakens the argument for a general economic necessity. For others, it is not enough to offset the volatility of a sector exposed to the strong franc and international competition.

Four years’ visibility, not a blank cheque

Supporters of the compromise emphasised predictability. Céline Amaudruz, a National Councillor for the Swiss People’s Party (SVP) from Geneva, argued that an extension would give businesses four years’ visibility before Parliament reviews the matter. Sidney Kamerzin, a National Councillor from the Valais Centre, emphasised the fragility of a volatile sector, subject to the strong franc and international competition.

For a hotel manager, this predictability has tangible value. It enables them to prepare price lists, negotiate with distribution partners, draw up multi-year budgets and calculate investment costs based on the assumption of a relatively stable VAT rate. Accountants can also plan their bookkeeping, carry out reconciliation checks and run margin simulations without having to immediately factor in a rate change.

However, the year 2031 changes the nature of the message. Parliament is not extending the measure indefinitely. The establishments concerned would therefore be well advised to use this window of opportunity to strengthen their management tools: segment-by-segment profitability analysis, monitoring of platform commissions, control of energy costs, pay policy, investment in administrative productivity and review of distribution contracts. VAT must not obscure the other factors determining profit margins.

Caution is also advised when it comes to pricing. When a business sells overnight stays well in advance or signs contracts covering several seasons, it should check how the clauses deal with any future changes to VAT. Depending on the wording of the contract, the change may be absorbed by the business or passed on to the customer. This point warrants a case-by-case analysis, particularly for package deals comprising several services.

Focus on small hotels ruled out

A proposal by the Socialists aimed to better target the support by restricting the extension of the 3.8 per cent rate to establishments with an annual turnover of less than 10 million francs. It was rejected by 115 votes to 75. For Daniela Schneeberger, a PLR National Councillor for Basel-Landschaft, this approach would have been too complicated and would have created inequality within the same sector.

In practical terms, targeting based on turnover thresholds would indeed have raised several operational questions for businesses and their accountants: which turnover figure should be used, how should groups, businesses operating across multiple legal entities, year-on-year variations or business takeovers be handled? Without going into a definitive legal opinion, it is clear that this type of threshold often creates areas of accounting and administrative tension.

The rejection of this option therefore maintains a sector-based approach rather than one based on the size of the business. For small businesses, this does not necessarily equate to maximum benefit, since the parliamentary debate has precisely shown that the distribution of the relief is contentious. On the other hand, the rule remains simpler to apply than a mechanism differentiated by turnover.

For accountancy firms, the immediate message is clear: they must monitor parliamentary developments until a final decision is reached, then prepare the clients concerned to adjust their VAT settings where necessary. Invoices, chart of accounts, statements, commercial quotations and booking interfaces must remain consistent. In the event of an audit, the issue is not merely the rate shown, but the justification for the treatment applied to each type of service.

This compromise illustrates a recurring trend in Swiss taxation: measures intended to be temporary can become instruments of economic policy that are the subject of ongoing debate. For hospitality businesses, the 2031 deadline offers a respite, not definitive certainty. The most forward-thinking will use this period to test their business model with and without the VAT advantage, so as not to discover too late that their profitability depends on a parliamentary decision.