VAT Balance Tax Rates 2026: Which Rate Applies to Your Business?

If you operate as an SME or freelancer in Switzerland and use the VAT balance tax method (BBM), you don't pay VAT according to the actual input tax principle. Instead, you settle using a sector-specific flat rate. It sounds simple — but which rate applies to which activity? And what happens if you combine multiple sectors? This article clears up the most common confusion.

What is the VAT Balance Tax Method?

With the BBM, you simply multiply your turnover (including VAT) by a flat rate set by the SFTA and transfer that amount. Input tax deductions are completely eliminated. The method is designed for businesses with annual turnover of no more than CHF 5.005 million and a tax liability of no more than CHF 103,000 per year.

The SFTA publishes a sector list with balance tax rates between 0.1% and 6.5%. These rates are calibrated to reflect the typical input tax share in each sector — so businesses with many taxable purchases generally benefit less.

Important: The balance tax rate is not an alternative to the standard rate (8.1%), the special rate for accommodation (3.8%), or the reduced rate (2.6%). It replaces the entire settlement logic — including input tax deduction.

Typical Balance Tax Rates by Sector (Selection 2026)

The following table shows a selection of common rates. You can obtain the full list with all sector codes directly from the SFTA guidance note on the VAT balance tax method.

Activity	BBM Rate
Business consulting, coaching	5.9%
IT services, web development	5.9%
Graphic design, advertising	5.9%
Auditor, accountant	5.9%
Architecture firm	5.9%
Cleaning company	5.2%
Hairdresser, cosmetics	3.7%
Restaurant (no accommodation)	5.1%
Retail (general)	2.1%
Vehicle dealership	0.6%
Doctor, dentist (not tax-exempt)	2.7%

Source: SFTA Guidance Note on VAT Balance Tax Method, 2026 edition. Rates may change with updates — always check the current SFTA publication.

What stands out?

Service businesses with low input costs — especially consultants, IT freelancers, and accountants — have one of the highest rates at 5.9%. The reason: they rarely buy taxable goods or materials, so the SFTA has little input tax to offset. For such businesses, the BBM often isn't as advantageous as for material-intensive trades.

Multiple Activities: What Applies Then?

Many SMEs pursue two or more activities — an IT freelancer who also sells hardware, or a hairdresser who also retails cosmetics. In these cases, the following rules apply:

• A maximum of two balance tax rates may be used simultaneously.
• You maintain separate records of turnover for each activity.
• If a third activity exceeds 10% of total turnover and falls under a different code, you must switch to the standard method or check whether one activity can be subsumed under an existing rate.

Example: A web developer offers programming services alongside online training. Both activities fall under the same sector code (5.9%), so she only needs to apply one BBM. If she adds physical goods sales with its own rate, she would need to separate them.

Calculation: How It Works in Practice

Let's say a self-employed management consultant has annual turnover of CHF 200,000 (including 8.1% VAT).

Standard method:

• Turnover excl. VAT: approx. CHF 184,996
• VAT owed (8.1%): approx. CHF 15,004
• Less input tax on business expenses (e.g. rent, software): varies by situation

VAT Balance Tax method:

• VAT owed: CHF 200,000 × 5.9% = CHF 11,800

The difference of roughly CHF 3,200 in favour of the BBM looks attractive — but only if actual input tax is low. However, someone with expensive professional equipment or office space with high input tax might do better with the standard method. This exact trade-off is covered in detail in our article on VAT balance tax in Switzerland: when it actually saves money.

Common Mistakes in Rate Selection

1. Using the wrong sector code The SFTA list is granular. "IT services" and "software development" may share the same code, but an IT hardware dealer falls under a different rate. Choosing the wrong code risks back payments during an audit.

2. Using net instead of gross turnover as the base The BBM is applied to gross turnover (including VAT) — not net turnover. This mistake systematically leads to underpayment.

3. Including tax-exempt turnover Export services and certain medical services are VAT-exempt. They don't form part of the BBM assessment base. Including them means overpaying.

4. Forgetting to notify a switch If you want to switch between the standard method and the BBM, you must notify the SFTA in writing by 31 January of the year in which it applies. A late application takes effect only from the following year.

How to Show the Balance Tax Rate on Your Invoice

If you use the BBM, you still issue invoices to customers with the statutory VAT rate (8.1%, 2.6%, or 3.8%) — not with the balance tax rate. The balance tax rate is internal, relevant only for settlement with the SFTA. On the customer invoice, the normal tax rate appears so your customers can deduct input tax themselves.

For correct display on your invoice, check out Swiss invoice template — all required fields — it lists all mandatory information clearly.

If you want to create invoices digitally and in compliance with VAT law, you can use SnapBill to generate QR-bills automatically with correct tax rates and IBAN/QR-IBAN fields.

At a Glance

• The BBM replaces input tax settlement with a sector-specific flat rate (0.1%–6.5%).
• The assessment base is gross turnover including VAT — not net turnover.
• A maximum of two different balance tax rates can be used simultaneously.
• Customer invoices still show the statutory VAT rate — the BBM stays internal.
• Notify a method change by 31 January, otherwise it takes effect only from the following year.
• For service-intensive businesses (consulting, IT), comparing with the standard method makes sense — a 5.9% BBM is high.