In short
Under the net tax rate method you pay your turnover including VAT times an industry rate set by the ESTV; input tax is already factored in. Under the effective method you pay output tax minus the input tax you actually paid. The net tax rate is allowed up to CHF 5,024,000 turnover and CHF 108,000 VAT payable per year. It usually pays off with little input tax and no large investments.
How the calculator compares
The calculator puts both methods side by side for one year.
- Effective method: it extracts the output tax from your turnover including VAT, using 8.1 / 108.1 for the standard rate and 2.6 / 102.6 for the reduced rate, and then deducts the input tax.
- Net tax rate method: total turnover including VAT times your net tax rate. Input tax is not deducted because the rate already accounts for it.
The difference shows which method is cheaper with your figures.
Example: painting business
A painter has CHF 300,000 turnover including VAT, all at the standard rate. She pays CHF 8,000 input tax on materials and tools. Her net tax rate is 4.5%, an example value.
| Method | Calculation | VAT payable |
|---|---|---|
| Effective | 300,000 × 8.1 / 108.1 = 22,479.19, less 8,000.00 | CHF 14,479.19 |
| Net tax rate | 300,000 × 4.5% | CHF 13,500.00 |
With the net tax rate she pays around CHF 980 less. If she buys a vehicle for CHF 60,000 plus VAT in the same year, her input tax rises by CHF 4,860. Then the effective method is cheaper, because with the net tax rate she cannot deduct that input tax.
Thresholds
The net tax rate method is only allowed if both conditions are met:
- taxable turnover of at most CHF 5,024,000 per year, including VAT
- VAT payable, calculated with the net tax rate, of at most CHF 108,000 per year
In the first year or when switching from the effective method, a lower turnover limit applies depending on the rate, for example CHF 1,590,000 at 6.8%. The calculator tells you if your turnover is above it.
Frequently asked questions
- Who benefits from the net tax rate method?
- Mainly service providers and small businesses with little input tax and no large investments. Besides a lower tax, the method saves effort because input tax no longer has to be recorded receipt by receipt.
- Where can I find the net tax rate for my industry?
- The ESTV sets the rates per industry and activity. The assignment is listed in the ESTV ordinance on net tax rates and in VAT Info 12. Since 2024 there are ten rates between 0.1% and 6.8%.
- Why doesn't input tax matter with the net tax rate?
- The net tax rate is calculated so that the average input tax of the industry is already deducted. That is why it is lower than the statutory rate, and individual input tax may not be deducted on top.
- Which rate goes on my invoices with the net tax rate?
- Always the statutory rate, for example 8.1%. The net tax rate only affects your return to the ESTV.
- Can I switch methods at any time?
- No. You can only switch at the start of a tax period, and the chosen method applies for a minimum period. VAT Info 12 from the ESTV describes the current deadlines.