Swiss VAT: Effective vs Flat-Rate (TDFN) Method

When you file your application to register for VAT, the AFC (ESTV) offers you two accounting methods. This choice, often made in a hurry, can mean several thousand francs of difference every year.

This article builds on our guide to VAT for SMEs.

Here is the full decision guide.

The two methods at a glance

Effective method

You account for your actual VAT:

• You collect VAT on all your sales (8.1% standard rate, 3.8% accommodation, 2.6% reduced rate)
• You reclaim the VAT on all your purchases (input tax)
• You pay the AFC the difference: VAT collected – VAT reclaimed

Upside: you reclaim 100% of the VAT on your expenses. Downside: heavier VAT bookkeeping and detailed quarterly returns.

Net tax rate method (NTR / TDFN)

The AFC assigns you a flat rate based on your industry (between 0.1% and 6.8% of turnover incl. VAT).

You simply apply that rate to your VAT-inclusive turnover — without calculating your actual input tax.

Upside: dead-simple bookkeeping, with just two returns a year. Downside: you don't reclaim your actual input tax — if you have a lot of purchases, you lose money.

Sample TDFN rates by industry (2025)

What's the real financial impact?

Example: Fiduciary firm, turnover CHF 200,000 (excl. VAT)

Effective method:

• VAT collected: CHF 200,000 × 8.1% = CHF 16,200
• Reclaimable VAT (rent, equipment, software): CHF 2,400
• Payable to the AFC: CHF 13,800

TDFN method (6.2% rate):

• Turnover (incl. VAT): CHF 200,000 + CHF 16,200 = CHF 216,200
• VAT payable: CHF 216,200 × 6.2% =CHF 13,404

In this case, TDFN comes out CHF 396/year cheaper.

Example: Retailer with high purchase volume, turnover CHF 500,000 (excl. VAT)

Effective method:

• VAT collected: CHF 500,000 × 8.1% = CHF 40,500
• Reclaimable VAT (goods, transport): CHF 18,000
• Payable to the AFC: CHF 22,500

TDFN method (2.1% rate):

• Turnover (incl. VAT): CHF 500,000 + CHF 40,500 = CHF 540,500
• VAT payable: CHF 540,500 × 2.1% = CHF 11,351

In this case, TDFN comes out CHF 11,149/year cheaper.

The general decision rule

The constraints of the TDFN method

• Turnover cap: annual turnover from taxable supplies (incl. VAT) must not exceed CHF 5,024,000, and the tax due must not exceed CHF 108,000 per year
• Switching TDFN → Effective: you can switch after one full tax period (1 year minimum)
• Switching Effective → TDFN: if you start out on the effective method, you're locked in for three full tax periods (3 years) before you can apply to switch to the TDFN method
• Notice deadline: the switch must be reported within 60 days of the start of the tax period concerned

What Klear Conseils does for you

During your onboarding, we analyze your cost structure and model both methods against your actual figures. We recommend the optimal method and handle all of your VAT returns — quarterly or half-yearly.

Further reading: VAT for SMEs