Update from September 2, 2026
The project of the Federal Council described below has not yet been adopted. Since the editorial date of this article, the Finance Committee of the Council of States has proposed a significantly different variant: an increase of the normal rate by 0.2 points and the special rate by 0.1 points, additional financing from part of the credit balances, an extended duration until 2045, and a vote postponed to 2028. This is a co-report addressed to the competent committee, not a decision of Parliament. Parliamentary review remains open.
On August 12, 2026, the Federal Council submitted to Parliament its message on a "contribution to security" financed by value-added tax. The shortcut is tempting: VAT would increase by 0.5 points starting in 2028. The actual proposal is more nuanced.
The standard rate would increase from 8.1% to 8.6%, the special accommodation rate from 3.8% to 4.1%, and the reduced rate would remain at 2.6%. The measure would last twelve years, and its proceeds would be allocated to the army's priority armament expenditures. Above all, nothing is yet guaranteed: the constitutional amendment must be approved by Parliament, then by the people and the cantons.
In brief
- No increase is currently in effect for this project.
- The Federal Council proposes, starting in 2028, a normal rate of 8.6 %, a special rate of 4.1 % and a reduced rate maintained at 2.6 %.
- The measure would be limited to December 31, 2039 and could not be extended without a new popular vote.
- The targeted revenues, close to CHF 24 billion, would exclusively finance military expenditures, through a fund that could incur debt up to CHF 6 billion.
- If the financing of the 13th AVS pension were also accepted, the normal rate could reach 9.0 % according to the two projects in their version of August 14, 2026.
What the Federal Council is actually proposing
The message of August 12, 2026 replaces the scheme put out for consultation in March. The first version provided for a stronger and broader increase: 0.8 points on the standard rate, 0.3 points on the reduced rate, and 0.4 points on the special rate, for ten years. After the consultation, the Federal Council reduced the burden, spared the reduced rate, and extended the duration to twelve years.
| Rates | In effect in 2026 | Federal Council project | Difference |
|---|---|---|---|
| Normal rate | 8.1 % | 8.6 % | +0.5 points |
| Special accommodation rate | 3.8 % | 4.1 % | +0.3 points |
| Reduced rate | 2.6 % | 2.6 % | No change |
The special rate of 3.8 % is only guaranteed until the end of 2027 under current law. Its extension is the subject of a separate project. If it were not extended, accommodation benefits would switch to the standard rate. The table above therefore presents the scenario chosen by the Federal Council, with this reservation.
0.5 point does not mean a 0.5 % increase on every price
A percentage point measures the difference between two rates. The change from 8.1 % to 8.6 % indeed represents 0.5 points, but the effect on a price including taxes depends on the price excluding taxes and how the company passes on the increase.
Example at the standard rate
For a service of CHF 1,000 excluding VAT, the tax amount would change from CHF 81 to CHF 86. The billed price would therefore increase from CHF 1,081 to CHF 1,086 if the net price remains the same and if the increase is fully passed on to the customer.
For a current price of CHF 100 including VAT, the theoretical increase would be about CHF 0.46, not CHF 0.50: CHF 100 ÷ 1.081 × 1.086 ≈ CHF 100.46.
In a B2B contract where the price is set excluding VAT, the tax is normally added to the net price. In a fixed price "VAT included" or hard to renegotiate, the company may have to absorb all or part of the increase in its margin. Therefore, the reading of the contract and the competitive situation matter more than a simple multiplication.
What would the revenues finance?
The Federal Council is assessing the additional investments needed at CHF 24 billion. About CHF 15 billion would be used for the rapid development of capabilities against remote attacks, cyberattacks, and drones, as well as for the protection of critical infrastructure. The remaining CHF 9 billion would compensate for the rise in prices in the international arms market.
The additional revenue would not finance all of the Confederation's security expenditures. The needs of civil offices — intelligence, population protection, federal police, or border protection — and the increase of the army's budget to 1% of GDP should be covered by the federal budget, reallocations, and savings measures.
A fund for armament would receive all of the additional revenues and part of the regular army budget. It could incur debt up to CHF 6 billion in order to make advance payments and absorb payment peaks. This debt should be fully repaid before the end of the temporary increase.
At what stage is the project?
As of August 14, 2026, the Federal Council adopted a message, not a tax increase. The planned course includes several locks:
- the two federal chambers must deliberate and reach a common text;
- the amendment to the Constitution is subject to a mandatory referendum;
- it must obtain the double majority of the people and the cantons;
- the legal and technical adaptations must then come into force.
The Federal Council's scenario aimed for a vote in the summer of 2027 and an entry into force on January 1, 2028. The increase would last until December 31, 2039, provided that the general competence of the Confederation to collect VAT, currently limited to 2035, is extended by at least four years. These dates therefore constitute a proposed political timetable, not a definitively established deadline.
What SMEs need to do today
For now, no rates, prices, or settings need to be changed. Anticipating does not mean prematurely creating a rate of 8.6% in the billing software. It mainly means identifying the areas that will need to be addressed if the reform passes the political stages.
- inventory the multi-year contracts, deposits, subscriptions, and periodic billings that may overlap with the rate change;
- check whether the prices are agreed upon excluding VAT, including VAT, or fixed without an adjustment clause;
- identify the affected systems: ERP, cash register, online shop, billing, expense reports, interfaces, and document templates;
- plan tests on rates, tax codes, rounding, credits, and corrections;
- maintain a reliable match between accounting revenue and VAT statements, particularly in the accounting closing file.
An unusual transitional rule is already provided
The message proposes to amend Article 115 LTVA to avoid an avalanche of corrections when less than twelve months separate the setting of rates and their entry into force. In certain situations, particularly for advance payments or periodic services, the old rates could continue to be declared for a limited period. The details would depend on when the tax liability arises and the period during which the service is provided.
This rule is not yet law in force. However, it deserves attention, as it could also apply to future VAT increases other than that intended for armament. Companies will need to follow the final instructions from the AFC; the old reflexes from the rate change in 2024 may not necessarily be sufficient.
What cost for households and businesses?
The Federal Council estimates that the proposed increase would raise the consumer price index by about 0.2% if fully passed on. According to the calculations of the AFC included in the message, the annual loss of purchasing power would be approximately between CHF 90 and CHF 425 depending on income and household type. However, these estimates are based on consumption data from 2018–2019 and exclude certain expenses, particularly the purchase or renovation of a home: these are orders of magnitude, not an individual bill.
For a fully taxable company, VAT remains neutral in principle thanks to the deduction of prior tax. The impact then focuses on implementation costs, cash flow, prices, and margins when the increase cannot be passed on. Sectors excluded from VAT — notably part of health, training, sports, and culture — bear more hidden tax, as they cannot recover all prior tax.
And what if the increase intended for the 13th AHV pension is added?
Parliament adopted another increase project in June 2026 effective from 2028 to partially finance the 13th AHV pension: standard rate from 8.1% to 8.5%, special rate from 3.8% to 4.0%, and reduced rate maintained at 2.6%. This increase still needs to be accepted in a popular vote on November 29, 2026.
| Scenario according to the projects as of 14.08.2026 | Normal rate | Accommodation | Reduced rate |
|---|---|---|---|
| Current situation | 8.1 % | 3.8 % | 2.6 % |
| Security only | 8.6% | 4.1% | 2.6 % |
| 13th AHV pension only | 8.5% | 4.0% | 2.6 % |
| Two projects accepted | 9.0% | 4.3% | 2.6 % |
The two projects are legally distinct and can evolve separately. Adding their rates allows for measuring a possible scenario, not announcing the 2028 rate as certain. At this stage, the billing software can therefore remain calm — its administrator too.
The opposing viewpoint: why VAT is contested
The Federal Council defends VAT as a broad, stable, quickly mobilizable source of revenue that is less harmful to economic activity than an increase in direct tax. Maintaining the reduced rate should limit the burden on essential goods.
Opponents may respond that VAT disproportionately affects households that consume most of their income, that it increases the cost of investments in sectors that do not recover the prior tax, and that it finances public policy through consumption, regardless of the ability to pay. They may also argue that funding through budget reallocations, direct tax, or unspent budget appropriations would be fairer or more coherent.
The consultation did not produce a consensus: about half of the participants supported VAT, while its effects on households, the economy, and its chances in voting were criticized. The debate therefore does not only concern the necessity of strengthening defense, which is widely recognized, but also the volume, timing, and method of financing.
How Delta Conseil SA can assist you
If a change in rates materializes, Delta Conseil SA can analyze the relevant contracts and flows, prepare the new tax codes, test billing and interfaces, control advances and periodic services, and then secure the first VAT settlements. The intervention should be planned when the text and schedule are sufficiently stabilized; there is no need to redo the entire ERP at the first press release.
Caution
This article mainly presents the message from the Federal Council of August 12, 2026, and separately notes the developments that occurred until September 2, 2026. The rates, duration, voting date, and entry into force can still be modified, or the project can be rejected. No operational adjustments should be based solely on these scenarios.
Frequently Asked Questions
Will the VAT automatically increase to 8.6% in 2028?
No. The Parliament must first adopt the constitutional amendment, and then the people and the cantons must accept it. The schedule and the rate can still change.
Would the reduced rate on food and medicines increase?
No, according to the message from the Federal Council of August 12, 2026. It would remain at 2.6%. The standard rate would increase by 0.5 points and the special accommodation rate by 0.3 points.
Would a liable business actually bear the cost of the increase?
In principle, it recovers the input tax and charges VAT to its customers. However, it may incur IT and administrative costs, a cash flow effect, or a decrease in margin if its prices including VAT cannot be adjusted.
Should contracts and software already be modified?
No. It is useful to identify sensitive contracts and systems, but the parameters should only be modified once the text, rates, and date of entry into force are sufficiently certain.
Would the CHF 24 billion also fund civil cybersecurity?
The proceeds from this increase would be allocated to the military's armament expenditures, particularly for military cyber defense capabilities. The additional needs of civil offices would be financed by the federal budget and reallocations.
Official sources
- Federal Council, press release and documents from August 12, 2026
- Message on the financing of armament expenditures and the armament fund
- Federal Council, project adaptation after consultation, June 24, 2026
- Federal Contributions Administration, current VAT rate
- OFAS, implementation and financing of the 13th AVS pension
- Federal Assembly, item 26.051 and status of parliamentary work
Last legal review: September 2, 2026.
Warning
This publication is provided for informational purposes and does not constitute individualized legal, tax, accounting, or financial advice. The situation must be assessed in light of the specific circumstances and the applicable law at the time of the decision.
For more information, please consult our Legal notices and warning.
