#1. Legislative History

N. 1 The current value added tax according to Art. 130 FC was introduced by the popular vote of 28 November 1993 (BBl 1994 I 389) as a replacement for the turnover tax on goods. The original version of Art. 41ter of the former FC (AS 1994 268) provided for a standard rate of at most 6.5% and a reduced rate of at least 2.0%. With the total revision of the Federal Constitution in 1999, the provision was adopted as Art. 130 FC (BBl 1997 I 1, 471 f.).

N. 2 Paragraphs 3 and 3bis were inserted by popular vote of 20 March 1998 (BBl 1997 III 653, AS 1998 1581) to secure AHV financing and co-finance railway infrastructure. The most recent addition was made with the AHV Reform 21, whereby paragraphs 3ter and 3quater were added by popular vote of 25 September 2022 (BBl 2022 2695, AS 2023 160).

N. 3 The 1996 message on the new Federal Constitution (BBl 1997 I 1, 471) characterised the value added tax as the «most important federal tax» with revenues of around 15 billion francs. The literature confirms that the value added tax, with revenues of over 22 billion francs (2023), represents the fiscally most significant source of revenue for the Confederation.

#2. Systematic Classification

N. 4 Art. 130 FC belongs to Title 3 on the Confederation, Cantons and Communes, Chapter 3 on Financial Provisions. The provision is closely systematically connected to → Art. 127 FC (principles of taxation), → Art. 133 FC (customs duties) and → Art. 134 FC (exclusion of cantonal and communal taxes). The value added tax is an exclusive federal tax, which prohibits the cantons from levying taxes of the same kind (Art. 134 FC).

N. 5 The constitutional anchoring as a value added tax with fixed maximum rates binds the legislature. Some commentators emphasise that Art. 130 FC grants the Confederation comprehensive competence to levy a value added tax, but does not establish an obligation to levy it. The legislature could theoretically refrain from levying it or set lower rates.

N. 6 The transitional provisions in → Art. 196 no. 14 FC regulate the temporal validity of the value added tax. According to para. 1 of this provision, the value added tax is levied until the end of 2035. Extension requires the consent of the People and the Cantons.

#3. Elements of the Offence / Content of the Provision

N. 7 Art. 130 para. 1 FC defines the value added tax as a general consumption tax according to the system of net multi-stage tax with input tax deduction. Some commentators characterise it as a gross multi-stage tax with input tax deduction. The subject of taxation comprises supplies of goods, services including own consumption as well as imports.

N. 8 The constitutional tax rate corridor establishes binding limits: The standard rate may not exceed 6.5% (currently 8.1% with all surcharges according to Art. 25 para. 1 VATA), the reduced rate must amount to at least 2.0% (currently 2.6% according to Art. 25 para. 2 lit. a VATA). For accommodation services, para. 2 provides for a special rate between the reduced and the standard rate (currently 3.8% according to Art. 25 para. 2 lit. b VATA).

N. 9 The possibilities for increases according to para. 3 (AHV financing), para. 3bis (railway infrastructure) and para. 3ter (AHV reform) are cumulative and lead to the current total rates. BGE 142 II 488 E. 2.2.1 confirms this constitutional basic structure as a «consumption tax according to the system of net multi-stage tax».

#4. Legal Consequences

N. 10 The levying of the value added tax takes place at the legislative level through the VATA. Subjective tax liability begins with an annual taxable turnover of CHF 100,000 from entrepreneurial activity (Art. 10 para. 2 lit. a VATA). Communes, cantons and other public institutions are subject to special rules (Art. 12 VATA).

N. 11 Para. 3quater orders the complete allocation of the proceeds from the increase according to para. 3 to the AHV Compensation Fund. This earmarking is constitutionally binding and cannot be changed by ordinary law. Camenzind et al. (Handbuch MWSTG, 3rd ed. 2012, § 1 N. 15) describe this regulation as «constitutional partial earmarking».

N. 12 The partial earmarking according to para. 4 obliges the use of 5% of the non-earmarked proceeds for premium reductions in health insurance for the benefit of lower income brackets. The Federal Assembly implemented this requirement in Art. 53 para. 3 VATA. The precise distribution is regulated by the Ordinance on Premium Reductions in Health Insurance (VPVK, SR 832.112.4).

#5. Controversial Issues

N. 13 The legal nature of the value added tax is disputed in doctrine. While one view in the literature speaks of a gross multi-stage tax with input tax deduction, Mollard/Oberson/Tissot Benedetto (Traité TVA, 2009, § 1 N. 12) qualify it as «impôt général sur la consommation». Robinson (Mehrwertsteuerrecht, in: Reich, Steuerrecht, 2nd ed. 2012, 645) emphasises the character as «indirect tax».

N. 14 The justiciability of the partial earmarking according to para. 4 is controversial. Rhinow/Schefer/Uebersax (Schweizerisches Verfassungsrecht, 3rd ed. 2016, N. 3687) represent the position that an enforceable claim by the cantons can be derived from the provision. Blumenstein/Locher (System des Schweizerischen Steuerrechts, 6th ed. 2002, 325) see only a political obligation of the Confederation.

N. 15 Some commentators criticise the system defects of value added tax law, in particular the error-prone complexity and the deficient application of the law by the FTA. This criticism was partly taken up in the Spori Report (Bericht des Beauftragten P. Spori in Sachen Mehrwertsteuerreform, 2006, 23 ff.), but did not lead to a fundamental system change.

N. 16 The constitutional admissibility of tax rulings in the VAT area is assessed differently. Baumgartner (Möglichkeiten und Grenzen von Steuer-Rulings, in: Mäusli-Allenspach/Beusch, 2013, 201 f.) affirms this by invoking → Art. 5 para. 3 FC (good faith). Geiger/Schluckebier (MWSTG Kommentar, 2012, Art. 69 N. 8) see constitutional limits for information that is contrary to the system.

#6. Practical Guidelines

N. 17 When interpreting Art. 130 FC, the Federal Court's case law on restrictive interpretation of tax exceptions must be observed. BGE 138 II 251 E. 2.3 established the principle: «Against the background of the generality and competitive neutrality of the value added tax, all kinds of exceptions are problematic. They must therefore be interpreted restrictively.»

N. 18 The practical application of the tax rates requires consultation of the FTA's VAT-Info publications, in particular VAT-Info 08 «Tax rates» and VAT-Info 19 «Hotel and catering trade». These practice determinations concretise the constitutional requirements and are to be appreciated according to BGE 151 II 364 E. 5.1.1 from the viewpoint of protection of legitimate expectations (→ Art. 5 para. 3 and → Art. 9 FC).

N. 19 The correct calculation of the current tax rates taking into account all constitutional surcharges is carried out according to the formula: Base rate + AHV surcharge (para. 3) + railway infrastructure surcharge (para. 3bis) + AHV reform surcharge (para. 3ter). The FTA publishes the applicable rates in the VAT Practice (VPB) and the VAT Sector Information.

#I. Constitutional Foundations of Value Added Tax

BGE 142 II 488 of 29 August 2016 (para. 2.2.1)
The Federal Supreme Court confirms the constitutional foundation of value added tax under Art. 130 Federal Constitution.
Central to understanding value added tax as a consumption tax under the net multi-stage system.

«According to Art. 130 para. 1 Federal Constitution and Art. 1 para. 1 VAT Act, the Confederation levies a value added tax. In tax technical terms, this type of tax is a consumption tax.»

BGE 140 II 80 of 1 January 2014 (para. 2.1)
The Federal Supreme Court specifies the characteristic element of service relationships in value added tax.
Fundamental for distinguishing tax law from private law relationships.

«According to Art. 130 para. 1 Federal Constitution and Art. 1 para. 1 sentence 1 VAT Act, the Confederation levies a value added tax, i.e. a general consumption tax under the net multi-stage tax system with input tax deduction. The exchange of services is characteristic of value added tax.»

#II. Tax Rates and Constitutional Conformity

BGE 123 II 16 of 1 January 1997 (para. 5)
The Federal Supreme Court examines the constitutional conformity of ordinance provisions regarding tax rates.
Leading case for distinguishing between standard and reduced rates for hospitality services.

«Art. 41ter para. 1 lit. a Federal Constitution introduces a turnover tax (value added tax). According to its para. 3, the value added tax burdens the supply of goods, services and imports according to the multi-stage principle with input tax deduction. The tax amounts to 2% inter alia on food and beverages, with the exception of alcoholic beverages, and 6.5% on the supply and import of other goods and on services.»

#III. Business Activity and Subjective Tax Liability

BGE 138 II 251 of 13 April 2012 (para. 2.3)
The Federal Supreme Court develops criteria for the subjective value added tax liability of art collectors.
Decisive for interpreting the concept of business in value added tax law.

«Against the background of the generality and competitive neutrality of value added tax, all types of exceptions are problematic. They must therefore be interpreted restrictively.»

#IV. Input Tax Deduction and Business Use

BGE 142 II 488 of 29 August 2016 (para. 2.3)
The Federal Supreme Court specifies the requirements for input tax deduction on art purchases.
Decisive for distinguishing business from private use.

«Input tax deduction requires, in addition to formal requirements, that the taxable person is economically burdened with input taxes and that these arise 'in the context of business activity'.»

#V. Protection of Legitimate Expectations and Right to Information

BGE 151 II 364 of 1 January 2025 (para. 5.1.1)
The Federal Supreme Court recognises a constitutional right to protection of legitimate expectations regarding VAT information.
Leading case for the relationship between Art. 69 VAT Act and constitutional principles.

«Art. 69 VAT Act grants the person seeking legal advice a right to information that is covered by the constitutional right to protection of legitimate expectations (Art. 5 para. 3 and Art. 9 Federal Constitution).»

#VI. Option Right and Formal Requirements

BGE 140 II 495 of 10 October 2014 (para. 2.2.1)
The Federal Supreme Court sets out the formal requirements for the option to tax.
Relevant for interpreting tax exemptions in Art. 130 Federal Constitution.

«The requirement to clearly express in an objective sense in the case of an option that a tax exemption is not claimed is mandatory.»

#VII. Recent Developments and Practice Determinations

BGE 149 II 290 of 21 June 2023 (para. 2)
The Federal Supreme Court clarifies the nature of consideration reductions in value added tax law.
Current for the treatment of complex service relationships.

«Whether there is one or two (main) services must be assessed on the basis of objective economic considerations.»