Switzerland Global Payroll & Tax Information Guide
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Ease of Doing Business in Switzerland: An Overview
Compared to most first world nations, Switzerland is a much happier country. Employment exceeds 80%, and the Swiss culture places great emphasis on families. The Swiss economy is considered as an employer-centric one.
Switzerland attracts wealthy individuals and foreign businesses with favorable tax rates, a strong economy, and a banking system renowned for its secrecy.
When moving to Switzerland, it’s important to get to grips with the Swiss tax system and tax rates, which vary considerably depending on which of the country’s 26 cantons you live in.
Companies based in Switzerland must pay corporate tax on taxable profits generated in the country. Non-resident companies may have to pay if they are partners of a Swiss business, have permanent establishments, own property, or act as a broker of real estate in Switzerland. Non-resident companies pay tax on the income generated in Switzerland.
Swiss corporate tax is levied at a federal, cantonal, and communal level. As a result, how much you pay varies depending on where your company is based.
Employers negotiate directly with their employees on work, compensation, and benefits terms. Citizens are highly affluent, and while there is a considerable wage gap between high and low income earners, citizen life satisfaction still scores among the top countries in Europe.
Payroll in Switzerland – 2021 Updates
Due to covid-19, from 1 January 2021 the following changes entered into force:
- New law on wage withholding taxes with amended rules regarding the filing of an ordinary tax return.
- Small increase of the premiums to the earnings compensation insurance (EO), reducing the available net salary.
- Several cantons enhanced the possibility for an electronic filing of the tax return and its enclosures.
The practice of the local tax authorities relating to the Covid-19 situation differ significantly. Some cantons disregard the home office days and allow the usual professions deductions for work related expenses, travel and lunch allowances.
Basic Facts about Payroll in Switzerland
Payroll in Switzerland is not simple. Tax collecting authorities invoice employers for income taxes owed. Employers file withheld taxes on a monthly or quarterly basis.
As such, employers must withhold federal, cantonal, and municipal taxes. Keeping track of which authority is owed what amount is a complex task, and employers are encouraged to work with a payroll professional. Further complicating payroll in Switzerland is the country’s liberal approach to residency and work permits. A Swiss workforce is made up of many residents and non-residents, some of whom live just across the border and commute to work in Switzerland. Each of these employees are taxed differently.
While federal government income taxes are low, Swiss employees must also pay cantonal, commune, and municipal taxes. There are significant tax breaks for employees with children. Social security taxes are a shared expense by the employee and employer, split evenly at 6.2% each. Social security in Switzerland services the elderly, unemployed, sick, and disabled.
The federal Swiss corporate tax rate is a flat rate of 8.5%, but additional cantonal and municipal rates can vary considerably. The maximum corporate tax rate including all federal, cantonal, and communal taxes is between 11.9% and 21.6%. However, a range of allowances and deductions means you’ll usually pay much less.
Compensation and Benefits
Swiss employers and employees negotiate directly overpay and benefits. There is no set minimum wage for most industries, and this is primarily due to employees and employers being able to come to mutually beneficial terms.
Employees with families are given an extra allowance by their employer. Maternity leave is generous in Switzerland. For work hours, normal workweek hours and overtime are also negotiated in work contract.
Citizens of a European Union country may come and go freely as employees of a Swiss employer. Foreign hires from non-treaty or non-EU nations must first obtain a work permit. These foreign workers are not guaranteed a work permit since Switzerland sets visa caps.
In order to help expats to avoid double taxation, Switzerland has double tax treaties with more than 100 countries.
Switzerland is one of more than 100 countries that has signed up for the automatic exchange of information (AEOI) system, which aims to prevent cross-border tax evasion.
For more information about how our Global Payroll Control Platform integrates with local payroll providers in Switzerland, contact us today
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Using Payslip, we can manage all our payrolls across nine in-country vendors on one platform. When the global Covid-19 pandemic arose, it was not an issue from a payroll perspective, and critically getting everyone paid. The Payslip platform enabled continuity for our international payroll service including the fast and seamless implementation of the Payslip Employment Self Service during this time.
Payroll Manager, LogMeIn
Payslip as a technology platform has added a missing piece in our payroll set-up. As an international company with offices in 16 countries, it’s important to us that every employee at GetYourGuide has the same great experience when accessing their pay data.
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With business and employee growth rates of above 50%, we rely on our vendors to deliver on time, every time. Payslip’s workflow automation, enables Phorest to manage our payroll provider process – data driven, real time and transparent. Payslip saves us time so we can focus on our business growth.
International Payroll Manager, Phorest
Payslip positions your team for success, and allows you to onboard hundreds of people when you need them very quickly and efficiently, in the same way for each country. The uniformed approach empowered our payroll teams to keep pace with our business.
Payslip also made our payroll process entirely transparent, which is invaluable to our payroll teams as we continue to grow and scale at such a rapid pace.
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