Every year brings changes for business owners and managers.
In May 2019, a majority of Swiss voters accepted a package of changes to the way companies are taxed known as The Federal Act on Tax Reform and AHV Financing (TRAF). Many of the changes flowing from this begin on 1 January 2020.
1. Social insurance taxes
Swiss social security taxes have several elements. The first three fund old age pensions (AVS/AHV), disability insurance (AI/IV) and maternity leave and military service (APG/EO-MSE). Rates for the second two remain the same (1.45% and 0.45%) in 2020. As a result of the May 2019 referendum the AVS/AHV rate rises from 8.4% to 8.7%. This means these three taxes together now total 10.55% of salary, of which half is deducted from the gross salary amount and the other half paid by the employer.
For those working independently without a company the total of these three deductions rises to 9.95% in 2020 – the rate is lower for income under CHF 56,900. Click here for details.
A fourth deduction of 2.2%, used to fund unemployment benefits, remains the same in 2020. Half of this is deducted from salary and half is paid by the employer. Those working independently without a company don’t pay these.
A fifth element, a deduction to fund payments made to families, rises in the cantons of FR, SO, BS, BL, SH, AI, SG, AG, VS and JU from 1 January 2020. All of this is payed by the employer. A list of 2020 rates for each canton is available here. Those working independently without a company must pay these too. In most cantons the rates are the same as for companies – click here for more detail.
Some cantons have other small salary based taxes and charges. In any case your compensation fund will update the rates and send you a bill.
Compulsory salary based pension deductions, also known as 2nd pillar pensions, do not change in 2020. The salary trigger point requiring pension deductions remains 21,330 francs and the amount deducted from gross salary before calculating the payment remains 24,885 francs.
Pension deductions are applied to a minimum sum of 3,555 francs for annual salaries from 21,330 to 28,440 francs, and a minimum sum of 60,435 francs for salaries above 85,320 francs. For salaries in between 28,440 and 85,320 francs, the figure used is the salary minus 24,885 francs.
Pension deduction rates are 7% for employees aged 25 to 34, 10% for those aged 35 to 44, 15% for those aged 45 to 54 and 18% for those aged 55 to 65. Half of this is deducted from gross salary and the other half is paid by the employer.
The VAT rates for 2020 are the same as for 2019. These are the standard rate of 7.7%, 3.8% for the accommodation sector and a reduced rate of 2.5% for household food, books, medicine and some other products.
In Switzerland, taxation varies by canton and municipality. Changes in 2020 depend on the canton and municipality where your business is based.
One big change in 2020 is the introduction of new lower company tax rates in many cantons resulting from the successful TRAF vote in May 2019.
The canton of Vaud lowered its company tax rate at the beginning of 2019 so there is no significant change this year, although commune level tax rates may change. In the municipality of Lausanne the 2020 rate is 13.99%.
Geneva’s new company tax rate comes into force on 1 January 2020. The new rate in the commune (municipality) of Ville de Genève is 13.99%, down from 24.16% in 2019.
New lower rates come into force in Basel-City (13.04%), Basel-Landschaft (13.45%), Zug (11.91%), Nidwalden (11.97%), Uri (12.64%), Glarus (12.42%), Schaffhausen (12.22%), Thurgau (13.40%), St. Gallen (14.50%), Neuchâtel (13.57%), Jura (15.10%), Solothurn (15.06%), Schwyz (14.13%), Appenzell Innerrhoden (12.66%), Graubunden (14.73%), Valais (16.98%), Ticino (15.89%), Fribourg (13.72%) and Zurich (19.7%, possibly reducing further to 18.19% by 2023). Rates remain the same in Bern (21.63%), Luzern (12.32%), Aargau (18.61%), Appenzell Ausserrhoden (13.04%) and Obwalden (12.74%). All of these rates are for the capital city of each canton. Some rates are proposed and not yet definitive.
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