Swiss tax changes for 2020: What you need to know

Towards the end of 2019, The Local Switzerland brought you a comprehensive list of everything that was set to change in 2020. 

READ MORE: Everything that changes in Switzerland in 2020

Prominent on that list was several changes to taxation in Switzerland. Given everything that changed when the clock struck midnight on December 31st - from outlawing single use plastics to new train timetables - we didn’t have much time to go into the detail of the taxation changes. 

In this tax-focused document, we break down what’s changing - and indeed what’s already changed - this year. 

One major change - which is unlikely to impact the average Swiss resident - is Switzerland’s tax haven status.

After a number of governmental changes in 2019, the European Union now no longer considers Switzerland a tax haven - which removes controls on EU transactions. 

Another range of changes came through the Federal Act on Tax Reform and AHV Financing reforms, which were approved by a majority of Swiss voters in May of 2019. Each change will be outlined separately below, or click here for a full rundown (in French). 

Old Age Pension Fund Contributions

Switzerland's ageing population has forecast a need to increase contributions to the old age pension fund (AHV).

For the first time in 40 years, the contribution made by employees will increase - from 8.4 percent to 8.7 percent, although half of this increase will be paid by employers. 

READ: Switzerland's strangest taxes - and what happens if you don't pay them 

Self employed or freelancing? You'll need to come up with the entire amount yourself - but the overall rate you’ll pay is lower if your income is under CHF56,900. 

Check out the specifics of the changes according to wage bracket here. 

Corporate taxes 

For anyone with a company in Switzerland, there are also some important changes to the corporate tax as a result of the referendum. 

Companies will be liable to pay lower tax rates in 2020 than previously in many Swiss cantons. 

The effective rates of corporate tax across the country in most cantons and municipalities will now be between 12 and 15 percent (including federal corporate tax). 

Some cantons, such as Zurich and Argau, the effective rate remains at 19.7 and 18.6 percent respectively. 

While some of the changes are modest, others are significant - in the city of Geneva for instance the tax rate dropped from 24.16 percent to 13.99 percent. 

The tax privileges that apply to holding, mixed, principal and domiciliary companies will be scrapped as they are not compliant with international law. 

Image: Depositphotos

Tax on patent rights

To encourage research and development, taxation will be reduced on patents and other similar rights. Tax relief for patents can be up to 90 percent. 

For those engaged in research and development, expenses incurred in the process can be deducted up to 150 percent in certain cantons. 

Dividends

Taxation on dividends on individual shareholdings has been increased. The federal level has been set at 70 percent, while the cantonal level will vary but it will be at least 50 percent in all cantons. 

There’s also a change to what is known as the transposition threshold, which had been set at 5 percent.

The appropriate amount for taxing a transposition of shares will now be calculated by working out the sales proceeds, less the nominal value and capital contribution reserves. 

Minimum and maximum taxation

While the Swiss tax provisions can get a little confusing, perhaps the simplest aspect to understand is the minimum and maximum taxation amounts. 

The minimum taxation amount is 30 percent, while the maximum is set at an even 70 percent. This means that no matter your earnings - and from what sources - the rate of tax paid should be within these two limits. 

What do the changes mean for me?

The changes came into effect in on January first, but there’s no need to rush off to the accountant just yet. In Switzerland, the tax year runs parallel to the calendar year - which means that you won’t need to worry about these changes until 2021. 

That said, it’s never too early to get your affairs in order *cough* receipts *cough*. Remember to store your receipts carefully - you need to keep them for 15 years following the end of the relevant tax period. 

Disclaimer

There are several different types of Swiss taxes and they are charged at the federal, cantonal and communal level, meaning they can get a tad confusing. 

As with any of the guides that appear on The Local Switzerland, this is not designed to replace the advice of a qualified tax advisor.

This is a guide only - it is not intended to be an exhaustive list of the relevant tax amounts or categories. More detailed information is available in English on the Swiss government website, including a link to the relevant cantonal tax administrator. 

 

 

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