Once a business is established, there are many ongoing administrative tasks required by law. The main ones are covered in this article.
The first few relate to employees and the rest to taxation and other essential administrative tasks.
1. Social insurance taxes
Businesses that employ people, including independents, must pay social insurance taxes. These are administered by compensation funds and rates vary slightly by fund and canton, but are around 15% of salaries. The rate for independents is lower.
Once employers are registered with a compensation fund the administration begins.
While there are many elements, such as contributions to the basic old age pension, invalidity insurance, income compensation and unemployment insurance, businesses only need to make one combined recurring payment, which is calculated as a percentage of all salaries.
The amount due has two parts: employee and employer. The employee portion must be deducted from salaries before they are paid.
The combined rate is around 15% of total salary, of which around 6% is deducted from salary payments.
Payments are typically requested monthly, although some smaller businesses receive quarterly bills.
Every time a business employs someone, or changes salaries, it must tell the compensation fund. The fund will then change the amount of the regular bills.
After 31 December, the compensation fund will request a final statement of all salaries paid over the calendar year. Any over or underpayment and interest will be calculated and processed and you’ll receive an additional bill or a refund.
All employers must make pensions contributions into a 2nd pillar pension for their staff once they earn above a certain amount – this is in addition to the pension payments included in social insurance tax payments above. Part of these payments is deducted from salaries and the rest is paid by the employer.
These second pillar pensions are managed by private funds that must follow strict rules. Companies must apply to be accepted. If your company has difficulty finding a fund the Substitute Occupational Benefit Institution will accept it.
The obligation to pay second pillar pensions kicks in when an employee earns over 21,150 francs a year. The minimum payments are a rising percentage of a specified portion of salary based on age.
25-34 years old 7%
35-44 years old 10%
45-54 years old 15%
55-651 years old 18%
1 64 for women.
These percentages are applied to a minimum sum of 3,525 francs2 for annual salaries from 21,1502 to 28,200 francs2, and a minimum sum of 59,925 francs2 for salaries above 84,600 francs2. For salaries in between, the figure used is the salary minus 24,675 francs2 – see new amounts from 1 January 2019 in note 2 below.
Half of these amounts are deducted from salaries and the rest is paid by the employer.
For example, for someone aged 35 on a salary of 50,000 francs, the company would need deduct 1,266.253 francs from the salary and pay 2,532.503 francs to the pension fund.
These figures are the minimum. Pension providers offer many plans with payments above these minimums.
2 3,555 francs, 21,330 francs, 28,440 francs, 60,435 francs, 85,320 francs, 24,885 francs from 1 January 2019 – source.
3 (50,000 – 24,675) x 10% = 2,532.50. 2,532.50 / 2 = 1,266.25
3. Paying salaries
Every month salaries and salary deductions need to be calculated and processed. Deductions include social insurance taxes and pensions. Employees need to be given a salary slip and payments need to be made to the employee, compensation fund and pension provider.
For some employees, income tax must be deducted from salary and paid directly to the tax administration. Cross-border and foreign residents that do not have C-permits fall into this category. To find out more contact the cantonal tax office. This tax is called impôt a la source in French and Quellensteuer in German.
There are systems designed for Swiss payroll. It is possible to test the English version of cloud-based Winbiz Payroll here at no cost.
Tip: when calculating how much your business can afford to pay a new hire it is important to consider all of these payments. A salary of CHF 70,000, after including social and accident insurance and compulsory pension payments, could cost your business CHF 84,0002. In this case, if your business could only afford to pay CHF 70,000 then the maximum salary you could offer would be around CHF 58,000.
2 Assumes employer payments of 9% (pension) + 8.5% (social taxes) + 2% (accident insurance).
4. Employee accident insurance
In addition to the social insurances above, employers must take out compulsory accident insurance, known as LAA (UVG), for their staff.
This insurance cover accidents at work, work-related illnesses and accidents outside work, unless the employee works less than eight hours a week.
Most private insurance companies offer this and it costs around 2% of total salaries. Payments are typically paid quarterly or annually in advance.
After 31 December, your insurer will request a final salary statement covering the calendar year. Any over or underpayment and interest will be calculated and processed.
VAT is administered by the Federal Tax Administration in Bern. All businesses that expect to generate CHF 100,000 or more a year must register.
VAT returns are typically filed every quarter, although in some cases they are requested monthly or every six months. They can be filed using a paper form, which comes by post, or online.
The regular filing delay is two months, so for example the return for the quarter ending on 31 March must be made by 31 May.
Most companies calculate VAT by adding up all the VAT charged on their invoices and then subtracting all the VAT they’ve paid. Instead, to simplify administration, some companies can apply to pay a fixed percentage of their revenue. This flat tax percentage varies from 0.1% to 6.5% depending on the company’s activity. Companies with revenue below 5.005 million collecting less than CHF 103,000 can apply to calculate VAT in this way – see flat tax percentages in French and German.
Businesses need to calculate their profits and value every year. Accounts can be done using a spreadsheet, however it can get complicated. Switzerland is administratively intensive and has its own particularities.
There are systems designed for Swiss administration. It is possible to test cloud-based Winbiz Accounting at no cost. And, it has an English version.
In Switzerland, individuals and companies pay three layers of tax: federal, cantonal and communal. Federal tax is the same across the whole country. Cantonal and communal taxes vary significantly.
For companies, the Federal rate is 7.8% on profit before tax (8.5% on profit after tax). After adding cantonal and communal taxes the overall effective tax rate on profit before tax ranges from around 12% to 24% depending on the canton and commune.
When you register your business or company the information is automatically communicated to the relevant cantonal tax office, which deals with all of the company’s tax administration.
A business must produce accounts made up of a balance sheet, profit and loss statement and notes every year. These accounts, or financial statements, are used to complete tax returns.
Most cantons give companies six months from their year-end to compile these statements and file their tax return. The first tax return can be pushed out to cover the period from incorporation to the end of the tax year following the year it was started.
Any company paying a dividend must declare this to the Federal Tax Administration in Bern and pay withholding tax of 35%. Withholding tax payments must be made to the Federal Tax Administration within 30 days of dividend approval. Shareholders get credit for much of these payments in their personal tax returns. More information on this can be found here in French and German.
Finally, your company must be valued by the cantonal tax administration. This valuation is used by company owners in their personal tax returns. The valuation is based on some combination of net book value and net profit – average net profit forms part of a perpetuity calculation.
It is possible to test cloud-based Winbiz Accounting, which is designed for Swiss businesses, at no cost.
Companies with fewer than 10 full-time employees do not require an audit if all of the shareholders agree. However, those with more than 10 full-time staff are required to undertake at least a limited audit every year. Larger companies with more than 250 employees may be required to undertake an ordinary audit, something that must be done by an independent auditor.
More information on this can be found here in English.
Tip: In November 2017, Switzerland’s federal government launched a new online tool, known as EasyGov to help with company set up and some administration, such as filing and paying VAT and paying social taxes. Using this requires an ID, which can be set up here.
If you have any questions then drop us a line in the comment box below and we’ll try to answer.
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