Running a Swiss Business: Understanding the Key Changes In 2024

Businesses operating or aspiring to operate in Switzerland must stay updated about its evolving culture, regulations, and economy. Understanding these changes allows you to adapt your business strategy proactively and succeed in the Swiss market.

This blog will highlight the most recent shifts in taxation, immigration policies, industry regulations, and consumer behavior. Read on to stay informed and to be able to make sound business decisions in 2024. 

Key Changes You Need To Know

Implementation of New Corporate Tax Rate in Switzerland

A key area significantly impacting Swiss businesses is the change in Switzerland's tax regime. In June 2023, most Swiss voters approved adopting a minimum corporate tax rate of 15%. 

This decision aligns with global efforts to stabilize the international tax system and prevent profit shifting by multinational corporations. The new tax rate was partially implemented on January 1, 2024, marking a substantial shift in Switzerland’s fiscal policy landscape.

Not A Tax Haven Anymore

A few years ago, the EU removed Switzerland from its list of tax havens because Switzerland agreed to update its tax system to meet global standards.

Despite complying with international tax norms, however, Switzerland remains an attractive destination for foreign investors, and most Swiss citizens see the changes positively.

Here’s what changed: 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. Instead, a standard corporate tax rate applies to all companies, from 12% to 15% nationwide, irrespective of origin.

Additionally, some Swiss regions made their own tax reforms. For instance, Geneva now has a standard corporate tax rate of 13.99%, replacing the previous dual rate system where special status companies paid 11.5% as against 24.16% paid by others.

Benefits for Research and Development

The tax system has provisions known as the patent box regime to encourage research and development. Under this regime, taxation on patents and other similar rights is reduced, and 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 an additional 50% on top of the original 100% R&D super deduction. This is based on the taxpayer's R&D personnel expenses, 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.

Social Protection Contributions

Switzerland's Social Security system prioritizes support for the elderly, survivors, and individuals with disabilities, ensuring a safety net for essential living expenses.

Recent tax reforms have bumped workers' contribution rate to 10.6% under AVS/AHV, covering old age, disability, unemployment, and family allowances. This is split evenly, with 5.3% from employees and employers, calculated based on gross salary.

To align with modern demographics, the retirement age for women has been gradually raised from 64 to 65. This reform offers more flexibility, allowing individuals to adjust their retirement age between 63 and 70, with a special provision for women born between 1961 and 1969.

Furthermore, employees over 65 (for men) or 64 (for women) can continue contributing to their pensions on their entire salary, foregoing the CHF 1,400 monthly deduction. This choice, made annually, aims to bridge contribution gaps and bolster future pensions.

VAT rates have also been adjusted, with standard, reduced, and special rates increasing marginally from January 1, 2024. The additional revenue directly supports AVS. Contributions for child benefits have also been slightly modified, dropping to 2.28%. The number differs in other cantons.

House Expenses From Taxes

Homeowners have been benefiting from new deductions in direct federal tax for some time now. It is now possible to spread out the costs of energy-saving upgrades and deconstruction expenses across three tax periods as part of the energy strategy implementation.

Investments

Investor protection will be improved on a selective basis. The Financial Services Act regulates how clients must be informed about financial instruments. Independent asset managers are now subject to supervision with the Financial Institutions Act.

New Requirements For Banks

The Swiss government has set new rules for banks to prevent another financial crisis like the one Credit Suisse faced. Under the proposal, Swiss parent companies of major banks like UBS will need to hold more capital to back their foreign investments, potentially raising it to 100% equity from the current 60%.

Energy Cost

Switzerland is expecting a notable increase in electricity prices this year. Based on forecasts by the Federal Electricity Commission, an average-sized household should anticipate an 18% rise in their electricity bills compared to 2023. This means that basic services will cost around 32.14 centimes per kilowatt hour, up by 4.94 centimes per kilowatt hour or a total of 200 francs for the entire year.

Animal Welfare Laws

Animal husbandry controls in problematic farms will be strengthened. In the coming months, 40 percent of inspections must be unannounced. Problematic farms will be checked more regularly, and 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 has been introduced for sheep and goats. Animals born before January 1, 2020, must have a second ear tag. Sheep require an electronic ear tag, while goat keepers can choose between tags with or without a microchip.

Pollution and Emissions

A target value of 95 grams of CO2 per kilometer for passenger cars now applies. Importers who do not reach this average value will pay a penalty. The improved energy label is intended to provide more transparency for car buyers. The new target value must be indicated on it.

Switzerland and the EU have linked their emissions trading systems. Swiss companies will thus also be able to trade their emissions rights in the larger EU market in the future. 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

Chlorothalonil, a fungicide, is now prohibited. The Federal Council banned its approval due to potential health risks. Consequently, products containing this substance are no longer permitted for use.

Many other changes may also roll out in the coming months, including bans on certain pesticides and military support for farmers during drought.

Health Care

Nurses can assess patients' care needs without a doctor's intervention.

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 considered in compulsory health insurance risk compensation. 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.

New regulations now prevent doctors from receiving financial benefits from pharmacy companies if those perks could sway their treatment decisions.

Price discounting has also been restricted for doctors; all discounts must be passed on to patients. That means doctors are no longer allowed to take the benefit.

In the upcoming months, health premiums for 2024 will increase by an average of 8.7%, equivalent to CHF 28.7 or $31.5. This raises the average monthly premium to CHF 359.5, marking the third-highest increase since the Health Insurance Act was introduced in 1996.

Money

Old banknotes can be exchanged for an unlimited time, 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.

Marriage

Marriageable bridal couples will now encounter fewer bureaucratic hurdles. The waiting period of ten days between marriage preparation and the wedding ceremony is being abolished. This means 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 Article's content 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.