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Switzerland – Increase in Social Security Contributions from 1 January 2020

Switzerland – Increase in Social Security Contributions

A new law in Switzerland will make corporate and individual tax adjustments and supplements Old age and survivors’ insurance (OASI) financing through an additional 0.3 percent in social security (OASI) contributions. The contribution rate for employers and employees will be increased by 0.15 percent each. This newsletter features the new employer and employee social security contribution rates.

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Senior Manager, Tax GMS Zurich

KPMG Switzerland

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A new law in Switzerland will make corporate and individual tax adjustments and supplements Old age and survivors’ insurance (OASI) financing through an additional 0.3 percent in social security (OASI) contributions.  The contribution rate for employers and employees will be increased by 0.15 percent each (CHF 1.50 per CHF 1,000 income).

On 19 May 2019, Federal Act on Tax Reform and AHV Financing (“TRAF”) was accepted in a public vote in Switzerland.The TRAF will come into force on 1 January 2020.

WHY THIS MATTERS

Social security-related costs for international employees coming to work in Switzerland who are subject to Swiss social security contributions, as well as for Swiss employees who work abroad but remain subject to Swiss social security contributions, will rise because of the changes introduced by the TRAF.  Similarly, the social security-related costs borne by their employers will go up.

Adjustments will need to be made to withholding on employees’ pay and remittances to the social security authorities. 

Context

TRAF aligns with a reduction in corporate tax rates at the cantonal level (depending on cantonal tax law adjustments).  The aim of this reduction, and the TRAF generally, was to create an internationally compliant, competitive tax system for companies in line with OECD standards.  With the TRAF, certain distinctions that come with Switzerland’s cantonal and federal level preferential tax and profit allocation regimes have been abolished and new standards in line with OECD have been introduced.

The TRAF generates urgently-needed additional finances for the OASI.  The TRAF will help ensure that the OASI receives an additional financing of CHF 2 billion per year beginning in 2020.  The Swiss federal government will contribute about CHF 800 million of the additional funds.  The remaining CHF 1.2 billion will be funded by employer and employees equally through the increased social security rates.

Table: New Rates

The new employer and employee contribution rates are as follows2:

  

  Employer contri-bution 2019 Emplo-yer contri-bution 2020 Emplo-yee contri-bution 2019 Emplo-yee contri-bution 2020 Total contri-bution 2019 Total contri-bution 2020
OASI (AHV)  4.20% 4.35% 4.20% 4.35% 8.40% 8.70%
IV 0.70% 0.70% 0.70% 0.70% 1.40% 1.40%
LEC (EO) 0.225% 0.225% 0.225% 0.225% 0.45% 0.45%
Total (OASI/IV/LEC) 5.125% 5.275% 5.125% 5.275% 10.25% 10.55%

FOOTNOTES

1  See the announcement of the TRAF (in English) by clicking here.

2  See the new Swiss social insurance contributions and benefits in the overview published (in English) by the KPMG International member firm in Switzerland by clicking here.

For further information in Swiss-German, see “Steuerreform und AHV-Finanzierung (STAF)“ with links to other relevant documents and texts.

CHF 1 = EUR 0.91

CHF 1 = USD 1.00

CHF 1 = GBP 0.779

CHF 1 = CAD 1.33 

The information contained in this newsletter was submitted by the KPMG International member firm in the Switzerland.

© 2021 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. Printed in Switzerland. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.

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Flash Alert is an Global Mobility Services publication of KPMG LLPs Washington National Tax practice. The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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