The new year has brought with it a raft of new laws and changes in Switzerland.
In this article, several changes in Switzerland were noted, taking into account everything that has changed since 1 January 2020, from taxation and contribution rates to the ban on disposable plastics.
One of the main changes which are unlikely to affect the average Swiss resident - is the tax haven status of Switzerland. The scope 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.
Key changes you need to know
- Not a tax haven anymore
As of 2020, the European Union changes the status of Switzerland from a "tax haven" to an EU-compliant country, removing the strict control of transactions within the EU. While the decision was made in October, it became official just from January 1st.
While Switzerland complies with international corporate tax standards, foreign investors are still confident to invest in Switzerland and the majority of the Swiss people find the reform beneficial.
First, it’s important to note that the preferential tax privileges for holdings, domicile and “mixed” companies at the cantonal level were canceled. Furthermore the profit allocation rules for principal companies and Swiss finance branches no longer apply at the federal level.
However, there is positive news for business owners: the corporate tax for companies is being reduced in almost all cantons of the country resulting from the successful TRAF vote in May 2019. Thus, the effective rate of corporate tax across the country now varies between 12-15%.
Whereas the changes in some cantons are minor, some cantons have significantly reduced the tax rate. In Geneva, for example, the corporate tax rate has been lowered from 24.16% to 13.99%.
- Benefits for Research and Development
The tax system offers the patent box regime provisions to encourage research and development. Taxation on patents and other similar rights is reduced. Tax relief for patents can be up to 90 percent.
Cantons may allow R&D costs incurred in Switzerland to be deducted for up to 150% of the actual costs incurred. This is based on R&D personnel expenses incurred by the taxpayer plus a 35% markup for other R&D costs, and 80% of the R&D costs charged by third party providers in Switzerland.
Check out more information about corporate taxation changes here.
- Rise of social protection contributions
One of the most important areas for the Swiss Social security system is old age, survivors’ and invalidity insurance. This compulsory insurance for everyone, that aims to cover basic living costs.
As a result of tax reform, the AVS/AHV contribution rate for staff rises from 8.4% to 8.7%. This applies to contributions of AHV / IV / EO / ALV, collected from wages and salaries, thus constituting 12.75% in 2020 (compared to 12.45% in 2019). Half is deducted from the gross salary amount and the other half is paid by the employer.
The minimum monthly social security payouts will remain fixed at 1,185 francs.
For self-employed persons, the contribution also increases by 0.3 percentage points. The contribution of the AHV increases from 7.8 to 8.1 percent in annual income over CHF 56,900. For lower income, a scale of deferred contributions is applied, which currently ranges from 7.55 to 4.35 percent. The minimum contribution to the AHV is increased from CHF 395 to CHF 409, which self-employed persons pay for an annual income of CHF 9,400.
This increase will guarantee more than 2 billion francs a year in social insurance.
- House expenses from taxes
Homeowners can now benefit from new deductions in direct federal tax from 2020 onwards. Expenses for energy-saving investments and deconstruction costs can now be spread over three consecutive tax periods. This is a measure to implement the energy strategy.
Investor protection will be improved on a selective basis. The Financial Services Act regulates how clients must be informed about financial instruments. With the Financial Institutions Act, independent asset managers are also now a subject to supervision.
- New requirements for banks
Stricter capital adequacy requirements apply to big banks. For UBS and Credit Suisse, the additional requirement amounts to around CHF 24 billion. Small and particularly well-capitalized banks and security firms will now benefit from administrative simplifications and savings.
- Energy cost
The compensation rates for photovoltaic systems will be reduced. The feed-in tariff will fall to 9 centimes per kilowatt hour, and the basic contribution of the one-off tariff from 1400 to 1000 Swiss francs. The Federal Council is thus releasing funds to speed up the reduction of waiting lists.
- Single use plastic ban
From 1 January 2020, single use plastics are prohibited in Geneva. This includes not only plastic bags from supermarket shelves, but also cups, cutlery, straws, plates and bags. Traders have repeatedly been informed of the ban - and they face a fine of 100 francs if they continue to offer disposable plastic bags.
- Animal welfare laws
Animal husbandry controls in problematic farms will be strengthened. In the future, 40 percent of inspections must be unannounced. Problematic farms will be checked more regularly, unproblematic farms less frequently.
The shredding of live chicks shall be prohibited. So far, male animals have been killed in some hatcheries using this method. Killing with CO2 is still permitted.
An animal movement database will be introduced for sheep and goats. Animals born before 1 January 2020 must be identified by a second ear tag. For sheep, an electronic ear tag is compulsory, while for goats the keeper can choose between ear tags with or without a microchip.
- Pollution and emissions
For passenger cars, a target value of 95 grams of CO2 per kilometer now applies. Importers who do not reach this average value will pay a penalty. For car buyers, the improved energy label is intended to provide more transparency. The new target value must be indicated on it.
Switzerland and the EU link their emissions trading systems. Swiss companies will thus also be able to trade their emissions rights in the larger EU market in future. To date, the Swiss emissions trading system covers slightly more than 50 emissions-intensive industrial plants. Due to the small number of participants, the Swiss market has so far only functioned to a limited extent.
- Use of fungicides
The fungicide chlorothalonil is forbidden. The Federal Council had already banned the approval in mid-December; from the beginning of 2020, thus products containing the active substance may no longer be used. This is because its negative effects on health cannot be ruled out.
A number of other changes have also been forecast, including bans on certain pesticides as well as military support for farmers during times of drought.
- Health care
Nurses will be able to assess care needs of patients without the intervention of a doctor.
Cancer diseases are recorded completely and uniformly in the national cancer registry throughout Switzerland. Doctors and hospitals must provide precisely defined data and the cantons are obliged to keep a cancer register or to join an existing register.
Pharmaceutical cost groups are now taken into account in the risk compensation of the compulsory health insurance. This allows patients suffering from cost-intensive chronic diseases to be identified. The insured structure of the individual insurance companies is thus better balanced, which makes the hunt for young, healthy insured persons less interesting.
As of January 1 2020, doctors are limited in receiving financial benefits from specific pharmacy companies, if it may affect the choice of treatment.
Price discounting is also restricted for doctors and all discounts must be passed on to patients. That means doctors are no longer allowed to take the benefit.
Health insurance premiums are set to rise from 2020. The average premium is set to increase by around 0.2 percent to roughly CHF315.14 francs per month. Note that the amount may vary in cantons, so you need to check with local authorities to know the exact difference.
Old banknotes can be exchanged for an unlimited period of time and not only for 20 years as before. The new rules apply to banknotes from the sixth series, which was issued in 1976. Until now, banknotes could still be exchanged at the National Bank during this period, but could no longer be used for payments.
Marriageable bridal couples encounter fewer bureaucratic hurdles. The waiting period of ten days between marriage preparation and the wedding ceremony will be abolished. This means that a wedding ceremony can be performed immediately after the marriage preparation procedure has been positively concluded. The requirements for marriage preparation will not change.
- Domestic violence
The Swiss confederation is becoming more involved in combating violence against women and domestic violence. There is now a legal basis for prevention projects and awareness campaigns. With the funds earmarked for this purpose, the Swiss confederation can now implement its own programs and projects, but also support private organizations.
NB. The content of the Article is intended for general information only and is not to be relied upon as advice on which to base any decision. To the extent permitted at law we do not accept any responsibility for any material appearing in the Article.