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Marlene Oswald
Leader Payroll & Employment Solutions East, PwC Switzerland
Taxes
Salary certificates and guidelines for completing salary certificates
Currently, there is no updated version of the instructions for completing the salary certificate for 2023. The version as of 1 January 2022 is still valid. Further explanations can be found in the questions and answers (FAQ) on the salary statement (only available in German, French and Italian).
Short-time work compensation
In 2022, pandemic-related short-time work compensation (Kurzarbeitsentschädigungen; KAE) continued to be paid. Until 31 December 2022, it is also possible to have the KAE for the years 2020 and 2021, which has already been processed in the summary procedure, reviewed in order to receive any subsequent payment for vacation and holiday entitlements.
According to margin no. 34 of the «Guidelines for completing the salary statement and pension statement», short-time work compensation should be declared in cipher 7 of the salary certificate «Other benefits».
Pandemic-related short-time work compensation has given rise to a number of challenges. Firstly, the summarised procedure used for this compensation may mean that employers are unable to allocate the payments to individual employees. Secondly, some employers continued to pay employees affected by short-time work their full salaries. Or employers felt no need to reflect this practice in their payroll accounting. As a pragmatic solution to this situation, the following note could be added under cipher 15: «This employee was affected by short-time work in 2022».
Home office days
In principle, employers are still not required to record the home office days of their employees on the salary certificate. Nevertheless, documentation can be useful. Particularly in an international context, inquiries from (foreign) authorities are to be expected. Especially in the case of cross-border commuters, the employer must ensure on the one hand that the social security deduction is correctly allocated. On the other hand, they must exclude the foreign working days in the withholding tax calculation (if a deduction must be made) in accordance with circular 45. This can only be done correctly if the employer knows when and where their employee has worked. The employers should document this properly with a travel calendar. We will be happy to support and advise you individually on this topic.
Cross-border commuters, international weekly residents and home office
During the pandemic, Switzerland had signed so-called mutual understanding agreements with the neighbouring countries of Germany, France, the Principality of Liechtenstein and Italy. These govern the taxation rights of the states concerned (handling of non-return days etc.). Since the pandemic-related measures have been lifted, the states have partially terminated the agreements in 2022 or have retained them as a transitional solution:
- Germany: The mutual agreement was terminated as of 30 June 2022. This means that the ordinary tax rules will apply again. On 15-18 July 2022, Germany and Switzerland signed a new consultation agreement. This clarifies that home office days do not count as non-return days.
- France: In the sense of an interim solution, a new mutual agreement was signed on 31 October 2022, although no measures to tackle the pandemic are still in force. On 27 October 2022, this was extended until 31 December 2022. Switzerland and France are working together on a long-term solution to facilitate home office from a tax perspective.
- Italy: The mutual agreement has been extended for the time being until 31 October 2022. The relevant authorities are in close contact to consult on the withholding tax settlement for home office activities. A communication is pending, we assume that the current agreement will remain in force until the end of the year.
- Principality of Liechtenstein: The mutual agreement was terminated as of 31 March 2022. Thus, the usual tax regulations apply again.
In accordance with this different legal starting position, the following circumstances must be dealt with individually (not conclusively):
- Pandemic-related home office during a period in which a mutual agreement existed with the affected country.
- Contractually agreed or voluntary home office during or outside a period in which an agreement with the affected country existed.
- Contractually agreed or voluntary home office in general.
In principle, the affected employees who worked exclusively in their home office due to the pandemic can be taxed as if they had spent these days at their usual place of work. Caution is required in the case of the other circumstances mentioned above or even «fake» home office. In this case, the employee works/worked in their vacation home abroad, for example. In such a case, we recommend a detailed analysis of the situation.
Switzerland has never had an agreement with other countries, including Austria. Consequently, employers must exclude working days abroad from taxation in accordance with the OECD Model Tax Convention.
Tax rules may differ from the principles of social security liability and must be evaluated on a case-by-case basis. We are happy to assist you in the evaluation and implementation of such cases. Thanks to our global payroll network, we can also assist you in the calculation and processing of foreign social security contributions.
Professional expense allowances and compensation in kind
For the tax year 2023, the maximum deduction for travel expenses will increase from CHF 3,000 to CHF 3,200 due to the compensation for the cold progression. Otherwise, the standard deductions for professional expenses will not be adjusted. The same applies to the valuation of benefits in kind.
Legislative changes
New data protection law
The totally revised Swiss Data Protection Act (revDSG) – and the associated new obligations for companies – will definitely come into force on 1 September 2023. The basic principles of data protection remain unchanged. For example, compliance with the familiar processing principles – including transparency, purpose limitation and data security. Many of the changes are in line with the European General Data Protection Regulation (EU GDPR). They include suppression of the protection of legal entities, introduction of an obligation to report data losses and breaches of data security, expansion of information obligations (these must be documented with a directory; the conditions are dependent on a specific minimum size of the companies), significant changes to data exports and stricter sanctions compared to the current law. Since the revised law does not provide for any transition periods, we recommend that companies and employers prepare for it now.
PwC news
Outsourcing of payroll services
For our payroll outsourcing services, we can produce the ISAE 3402 Type II attestation according to the «International Standard of Assurance Engagements». The annual report is available in July of the following year. Upon request, we will be happy to provide you with the current report for 2021.
This attestation is designed to give our clients – as responsible decision-makers – the reassurance that our payroll outsourcing services are covered by an adequate internal control system and that all relevant business processes are monitored. The Type II report confirms that we have established all required controls and implemented them over a defined period of time.
We recommend that you send our ISAE attestation to your auditors. This may help with the planning and have a positive impact on the cost of the audit, as it will cut down on the audit actions required in connection with payroll outsourcing. We will be happy to provide you with the document on request and answer any questions you may have.
On-site support
If you need support with payroll processing in the event of short- or long-term absences such as maternity/paternity/caregiver leave, illness, accident or fluctuation, we will be happy to support you on site or remotely. Depending on your needs, we will provide you with the right person from our team of payroll experts. Within the framework of a staff leasing arrangement, this person will take care of the payroll processing on site or support your payroll officers as required.
Specialised consulting
No question is too complex for us. We are happy to support you with any questions on individual issues, for example on your employer obligations in the areas of taxes and social insurance in the frame of home office in an international context or in the revision of your regulations.
Abacus Payroll software
If you use Abacus business software for payroll accounting, we can show you how to make your payroll processing more efficient, for example with suitable wage types, tables, automations or interfaces.
Our experts are personally available to you for all of the above-mentioned topics. We look forward to hearing from you.
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Social security
Unemployment insurance contribution adjustment (ALV)
As of 1 January 2023, the solidarity percentage for contributions to the ALV will be suppressed. This means that contributions will no longer be due on salary components exceeding CHF 148,200 per year. Up to this limit, the contribution will continue to be 2.2%. Employers and employees must each pay half of this amount.
The solidarity percentage was introduced in 2011 due to the heavy indebtedness of the ALV. As soon as the equity of the ALV compensation fund exceeds the threshold of CHF 2.5 billion – which will be the case at the end of 2022 – the right to levy the solidarity percentage will cease.
Changes to the income replacement regulations (EO)
As of 1 January 2023, the maximum amount of compensation will be increased from the current CHF 245 to CHF 275 per day. This is relevant, among other things, for maternity, paternity, care and adoption compensation, which will be increased from a maximum of CHF 196 to CHF 220 per day.
Learn more
Adoption vacation
On 1 January 2023, adoption leave will come into effect. Employed persons who adopt a child younger than four years old may apply for a two-week adoption leave. They must take this within one year. If both parents are employed, they may freely divide the two weeks between them. Financing is provided in the same way as for maternity and paternity leave, also through the Employment Replacement Ordinance (EO). On 6 October 2022, the circular on the adoption indemnity (KS AdopE) was published. It specifies the registration procedure, entitlement, amount of compensation and other aspects of the adoption leave.
Transitional arrangement for social security submission
In principle, the measures to fight COVID-19 have not changed the social security status of persons to whom the Agreement on the Free Movement of Persons or the EFTA Convention applies. The same applies to persons who are subject to a bilateral social security agreement. In the meantime, there are hardly any measures that affect cross-border activities while teleworking has become established. To take this into account, the members of the EU Administrative Commission decided on 14 June 2022, on a transitional arrangement for the coordination of national systems. Accordingly, the flexible application of the submission rules will be extended until 31 December 2022. Accordingly, this extension does not only apply to the measure-related home office activity, but in general within the framework of the Agreement on the Free Movement of Persons and the EFTA Convention. An A1 certificate does not have to be applied for in these circumstances.
In 2023, employers should keep an eye on the cases of employees concerned and, if necessary, consider changing the guidelines on home office and teleworking. This applies in particular if the continuation or expansion of home office is under discussion. It is planned that as of 1 January 2023, a certain amount of telework could be performed in the country of residence. However, this percent-age has not yet been determined. In addition to tax and social security issues, we recommend taking into account other legal areas such as the mandatory provisions of the labour law of the respective country of residence and other relevant legal bases, so that employers can fully comply with their obligations and minimise risks. We are happy to support you in this respect.
Gradual increase in the retirement age for women
On 25 September 2022, Swiss voters approved the reform to stabilise old age and survivors’ insurance (OASI 21). This will bring the reference age for women in line with that of men at 65. The reform will come into force on 1 January 2024. However, it will be implemented gradually by three months each year, so that the uniform reference age of 65 will apply from 2028. The women born between 1961 and 1969 belong to the transitional generation. As they are close to retirement, they can benefit from compensatory measures. These include a lifelong pension supplement for those who do not draw their retirement pension in advance and lower reduction rates for those who draw their retirement pension in advance. This adjustment will also affect insurance areas such as occupational pensions. We recommend that employers check at an early stage what action needs to be taken in this regard. This includes, for example, a revision of the employee regulations or handbook or technical system adjustments in payroll processing.
Limit amounts of occupational pension plan (BVG)
As the OASI/IV pensions (maximum annual OASI pension: CHF 29,400) will be adjusted at the turn of the year, the BVG limit amounts for 2023 will change.
BVG minimum interest rate
The BVG minimum interest rate remains unchanged at 1% for 2023.
Family allowances
Please refer to the current online information regarding family allowances and contributions to family compensation funds. Depending on the canton, the allowances and contribution rates may be adjusted for 2023. You can find out more here (only available in German, French and Italian). Any other cantonal insurances and levies are also partially listed here.