Gfeller + Partner AG

Debt interest deduction massively restricted - what's behind the change to the imputed rental value system

There is currently a lot to read and hear about the federal vote on September 28, 2025 regarding the planned change to the imputed rental value system: The imputed rental value is to be abolished; in return, there will be restrictions on tax deductions and the cantons will be given the option of introducing a property tax for predominantly owner-occupied second properties.

With this newsletter, we would like to draw attention to a point that is usually neglected in the public debate - but which can have a major impact on a far more significant group of taxpayers than just homeowners: the completely redesigned and, in most cases, significantly restricted debt interest deduction.

1. what will change specifically if the proposal is accepted?

• Imputed rental value: no longer applies to owner-occupied residential property (primary and secondary residences).
• Maintenance deductions: in future, maintenance costs will no longer be deductible for direct federal tax purposes (with the exception of monument protection); cantonal energy/environmental deductions will be possible until 2050 at the latest.
• Restructuring of the debt interest deduction: see Chapter 2.
• First-time buyer deduction: Anyone buying a permanently owner-occupied property for the first time can deduct (additional) mortgage interest for ten years (max. CHF 10,000 per year for married couples, CHF 5,000 for individuals; the deduction decreases by 10% each year on a straight-line basis).

• Property tax: cantons may tax secondary properties separately

‍2Hidden centerpiece: Pro rata debt interest deduction

The real explosive force of the system change lies not in the abolition of the imputed rental value, but in the redefinition of the debt interest deduction. This point is often overlooked in the public debate - but it is a substantial change with consequences for all taxpayers.

In future, private debt interest will no longer be deductible without further ado, but will only be deductible within narrow limits and according to a quota (in proportion to the share of rented property in total assets). If the property is not rented out, the debt interest deduction is no longer applicable - even for mortgages on your own home, Lombard or consumer loans. The previous rule (CHF 50,000 plus investment income) no longer applies.

The following example shows the substantial impact the reorganization of the debt interest deduction can have for all taxpayers:

Mrs. X lives in the Canton of Berne and, as an entrepreneur, has total assets of CHF 5 million (investment property of CHF 1 million, securities of CHF 2 million and company tax value of CHF 2 million). The ratio of immovable assets to total assets is 20%.

The net income less all general deductions amounts to a total of CHF 240,000 (salary income, rental income, dividends from listed securities and a dividend from his own company). The mortgage interest amounts to CHF 20,000.

Now only 20% of the debt interest, i.e. CHF 4,000 instead of the previous CHF 20,000, is deductible.

This results in a CHF 16,000 higher (annual) income, which means that an annual additional income tax of around CHF 6'500 is incurred. In the canton of Berne, depending on the constellation, wealth tax also increases by wealth tax by up to CHF 4,000 per year. ‍

‍Conclusion

Although the pending system change eliminates the controversial notional income, it also brings far-reaching changes to the debt interest deduction. These affect not only homeowners, but all taxpayers who have debt interest in any form. It is therefore worth taking a differentiated look at the bill and carefully examining the effects (on your own situation) - before a decision is made at the ballot box on September 28, 2025. 

Dear customers

Dear business partner 

Time marches inexorably on and cannot be stopped. That is why we are also required to find a successor solution for the partners who will be leaving in the next few years. And we have indeed found one. From January 1, 2025, Moana Caspar and Michael Schneider will join the ranks of the existing partners. This decision is the logical consequence of the excellent professional expertise, great commitment and empathy that both of them bring to their daily work in our company. 

I am delighted that we are able to shape the future of Gfeller + Partner AG together with Moana and Michael and wish them both much joy and success, as well as exciting challenges in their new roles. 

Christoph Andenmatten

Sustainability - what is it all about?

There is no clear definition of the term sustainability. However, sustainable business is understood to mean the permanent weighing up of social, ecological and economic aspects against each other so that they are in a reasonable relationship with each other. In addition to environmental issues, sustainability therefore also encompasses social and employee concerns, human rights and the fight against corruption.

What has happened so far (in Switzerland on the political stage)

In November 2020, the Swiss people voted on the Responsible Business Initiative. As this failed at the ballot box, Parliament's indirect counter-proposal came into force on January 1, 2022. Provisions on non-financial reporting were added to Art. 964a to i CO. These currently only apply to listed companies with more than 500 employees and mean that these companies must prepare sustainability reporting.

‍Whatare the current developments?

In the EU, the relevant regulations have been further developed in recent years. As the Federal Council wants to harmonize the regulations applicable in Switzerland internationally, there is a need for adaptation. At its June meeting, it opened the consultation on the new provisions on reporting obligations for companies. The most significant change: in line with the EU, companies with 250 employees or more will now be subject to reporting requirements if their balance sheet total exceeds CHF 25 million or turnover exceeds CHF 50 million in two consecutive years.

‍Whatare the opportunities for SMEs to benefit from this development?

Sustainability management can become a driver of value enhancement because stakeholders increasingly expect sustainability to be integrated into the operational business, which in turn can mean risk reduction, value enhancement and market differentiation.

The following aspects should be highlighted as examples:

• Access to capital:‍ Increases access to capital and strengthens earnings growth (investor interest in so-called green investments, more favorable interest rates for debt capital)

• Regulatory compliance: Reduces the risk of regulatory incidents, guarantees compliance and increases credibility

• Employee engagement and retention: attracts talent and helps to retain them and tie them to the company (younger employees pay attention to sustainability)

• Operational efficiency: Increases productivity, reduces resource utilization and increases efficiency

• Innovation and creation of business opportunities: Creates access to new market segments

• Brand differentiation: Increases market advantages through brand and product differentiation

Due to the interconnectedness of supply chains, SMEs will also be confronted with this issue sooner or later (e.g. by customers who demand corresponding proof). It therefore makes sense to think about where your company currently stands in terms of sustainability at an early stage, even without a statutory reporting obligation.

With Christoph Andenmatten, Gfeller + Partner AG has a long-standing auditor and consultant who has undergone further training in the field of sustainability and will be happy to assist you with conceptual questions or to carry out an analysis of your company with a sense of proportion. Please do not hesitate to contact us.

General

Increase in VAT rates in connection with supplementary AHV financing

New VAT rates will apply from January 1, 2024. The standard rate will increase from 7.7 % to 8.1 %. The reduced tax rate will increase from 2.5 % to 2.6 % and the tax on accommodation services (special rate) will increase from 3.7 % to 3.8 %.

The adjustment of VAT rates is accompanied by an update of the balance and flat-rate tax rates by sector and activity.

You can find detailed information on the consequences of the changeover in our article:

https://www.gfeller-partner.ch/news/erhohung-der-mehrwertsteuersatze-per-1-januar-2024

Abolition of the tax exemption for electric cars in the automobile tax

From January 1, 2024, electric cars will be subject to the 4% automobile tax. The reason for the abolition of the tax exemption is the rapid increase in imported electric cars in recent years and the resulting tax losses, which have been estimated at two to three billion Swiss francs for the years 2024 to 2030. The tax calculation is based on the import price, not the retail price.

Cantonal vehicle taxes must be distinguished from the federal vehicle tax. Here, electric cars continue to benefit from any existing concessions in the canton of registration. In the canton of Berne, for example, the standard tax for passenger cars in energy efficiency categories A and B is reduced by 40% (energy efficiency category A) or 20% (energy efficiency category B) for the first four years from the first registration.

Legal entities

Introduction of minimum taxation for large corporations

The OECD (Organization for Economic Cooperation and Development) minimum tax rate was introduced in Switzerland on 1 January 2024 - in line with a large majority of EU member states and other important industrialized countries. The additional tax of at least 15 % will be levied on large, internationally active corporate groups with a turnover of more than 750 million euros from January 1, 2024.  

Abolition of industrial tariffs

As part of the "import facilitation" package of measures, the Federal Council decided to abolish industrial tariffs, i.e. customs duties on industrial products (all goods with the exception of agricultural products) as of January 1, 2024. It is hoped that the abolition of customs duties will strengthen Switzerland as a business and industrial location and reduce barriers to trade. Consumers will also benefit from the measure, as customs duties were previously also applied to imports of various consumer goods, such as cars, bicycles, personal care products, household appliances and clothing. In sectors with functioning competition, the savings are passed on to consumers. The transfer is checked by means of monitoring.

‍Naturalpersons

New energy-saving measures in the canton of Bern

Photovoltaic systems and solar thermal systems are exempt from official valuation from January 1, 2024 (previously only applied to rooftop photovoltaic systems). These systems are now valued as movable assets at 20% of their acquisition value. 

From January 1, 2024, the consumption of energy generated by photovoltaic and solar thermal systems will no longer be considered own use and will not be included in the imputed rental value (previously only applied to photovoltaic systems). The proceeds from the sale of self-generated electricity will also remain tax-free to the extent of own use (so-called "net principle"). In practice, a de minimis limit will be introduced to simplify the assessment. 

For both new and existing buildings, the investment costs for photovoltaic and solar thermal systems can be deducted as maintenance costs from January 1, 2024. Up to and including tax year 2023, only investments in existing buildings are considered maintenance costs. Other energy-saving measures can still only be deducted on existing buildings.

Increase in the deduction for third-party childcare in the canton of Bern

Costs for proven third-party childcare of up to CHF 16,000 will be deductible in the canton of Bern from January 1, 2024. The maximum deduction up to and including tax year 2023 was CHF 12,000. For direct federal tax, the maximum deduction is now CHF 25,500 per child per year.  

The requirements for claiming the deduction (proof of third-party care costs, children before the age of 14 and living in the same household, causal connection) remain unchanged.

Relevant cantonal tax base for withholding tax in the canton of Bern

For cantonal tax, the tax base for withholding tax is now set at the tax base for the current year instead of the previous year. For municipal tax, the weighted average of the tax rates of the previous year of the municipalities with persons subject to withholding tax is decisive.

Increase in VAT rates as of January 1, 2024

The referendum in September 2022 approved the amendment to the AHV Act and the federal decree on the additional financing of the AHV. As a result, the VAT rates of the effective accounting method will be increased as follows on January 1, 2024:

The majority of balance and flat-rate tax rates will also be adjusted. Now is the time to address the issue of rate increases.

Cross-period benefits: How do I set the correct tax rate?

In order to determine the correct tax rate, the time at which the service is provided is always decisive. In the case of cross-period services (i.e. services that continue beyond the end of the year), they must always be divided into a service period before and after 01.01.2024 and settled pro rata temporis at the previous or new tax rate; specifically:

- If the benefit is provided by 31.12.2023, it is subject to the previous rate (7.7 %, 2.5 % or 3.7 %);

- If the service is provided or due from 01.01.2024 (e.g. in the case of advance payments), the new tax rates (8.1%, 2.6% or 3.8%) must be applied.

Neither the date of the invoice nor the date of payment are therefore decisive for determining the tax rate, but only the date or period in which the service is provided. Services must therefore be broken down on the invoice according to the relevant period and charged at the correct tax rate for the period in question. This applies, for example, to periodic services such as subscriptions.

What to consider during the changeover - our recommendation

The earlier you deal with the issue of "changes to VAT rates", the easier it will be to implement them. In order to maintain an overview of previous and new VAT rates and to simplify invoicing, we recommend concluding orders at the end of 2023 via partial invoices to the service recipient. This measure will make it easier to issue invoices in 2024 and to identify the service period and thus split the invoice. At the same time, invoicing will result in lower work in progress as at 31.12.2023, which will simplify the annual financial statements and please the CFO.

You should also be able to answer the following questions positively at the turn of the year:

1. have all official price lists been changed to the new VAT rates from 01.01.2024?

2. is the accounting program set up in such a way that the previous and new tax rates can be recorded?

3. has the format of the VAT quarterly statements in the accounting program been adapted?
--> The VAT settlement forms have been revised as of 01.07.2023 so that the previous and new VAT rates can be settled with the Federal Tax Administration, VAT Department.

4. have all employees been trained in the effects of the VAT rate increase?

a. Are they sensitized to the fact that they look at invoices more critically than usual before entering them in the accounting department at the turn of the year in order to book them correctly?

b. Will you check and list the correct VAT rates on the invoices received and issued? It should be noted that an invoice may contain services with the previous and the new VAT rate.

Detailed information can be found in the "VAT Info 19" Tax rate increase as of January 1, 2024. We will be happy to assist you with further questions and solutions.  

Quality and reliability are the gold standard of today and tomorrow.

- unknown author-

Gfeller + Partner AG is again mentioned in the list of "Top tax experts and trustees in Switzerland 2024" and was awarded the seal of the renowned Swiss business magazine BILANZ!

We are proud to be part of this prestigious circle in the Tax Consulting and Accounting sector.

At the same time, it motivates us to continue to provide our advisory services at the highest level every day and thus create real added value for our customers.

A big thank you at this point for the trust you have placed in us and the recommendation!

We would like to thank our employees for their tireless commitment and enthusiasm!

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Taxes and law - overview of the main changes as of January 1, 2023

Every year at the turn of the year, a large number of changes and/or amendments to the law come into force. With this newsletter we inform you in short form and without claim to completeness about the most important and for you relevant topics.

Do not hesitate to contact us if you have any questions.

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I. Law

Inheritance Law Revision

Changes to both mandatory parts

The most important change in the revision of inheritance law concerns the right to a compulsory portion - i.e. that part of the legal share of the inheritance which cannot be withdrawn from certain heirs even against their will.  

Without a testamentary disposition, the statutory share of the inheritance (standard cases: spouse ½ and children ½ or spouse ¾ and parents ¼) continues to apply. However, by means of a testamentary disposition, the statutory heirs (spouse/registered partner and descendants) can be placed on the so-called compulsory portion. 

The compulsory share of the descendants has been reduced from ¾ to ½ of the statutory share of the inheritance (i.e. ½ of ½, i.e. ¼). The compulsory portion of the parents (previously ½ of the statutory share of the inheritance) is eliminated completely. There are no changes to the compulsory share of the surviving spouse or registered partner (½ of the statutory share of the inheritance).  

The reduction of the compulsory portion leads to an increase in the testator's freedom of disposal - in any case, at least half of the estate can be freely disposed of. For example, the freely disposable part can be allocated to a specific Eben, or a person outside the circle of legal heirs or a charitable organization can be granted.

Cohabiting partners will not be considered legal heirs in the future either and accordingly will not be entitled to a compulsory portion. In this respect, their position will not change as a result of the revised inheritance law. On the other hand, cohabiting partners can be given a larger share of the freely disposable inheritance in their wills. The inheritance taxes payable depend on cantonal law and vary accordingly. 

The new rules apply to all inheritances (i.e. date of death) from January 1, 2023. However, the new rules also apply to wills and inheritance contracts drawn up earlier. We therefore recommend that you review existing wills and inheritance contracts and clarify whether they are also up-to-date, correct and clear under the new inheritance law.

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Useful capacity

Due to the changes in the right to a compulsory portion, the surviving spouse can now be allocated half as a share of the inheritance and the second half as a usufruct (previously ¼ of the estate as property and ¾ of the estate as usufruct).

Change in the protection of the compulsory portion in the event of pending divorce proceedings

Under the previous inheritance law, the spouse lost his or her entitlement to inheritance and compulsory portion only upon the existence of a final divorce or dissolution decree.  

With the entry into force of the revision of the law of succession, the compulsory share of the still-spouse shall cease to apply if, at the time of the death of one spouse, the spouses are in divorce proceedings on joint request or in divorce proceedings after two years of separation.

If the surviving spouse/partner is to be excluded from the succession while the divorce or dissolution proceedings are still pending, a testamentary disposition is mandatory, with which the legal share of the inheritance is withdrawn from the spouse/partner. Without active intervention, the surviving spouse/partner retains his/her statutory inheritance entitlement until a final divorce or dissolution decree has been issued.

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Gifts after the conclusion of an inheritance contract

A weighty change arises in the admissibility of gifts in the existence of an inheritance contract.  

Now, gifts after the conclusion of an inheritance contract are only possible to a limited extent. With the exception of the usual occasional gifts, gifts inter vivos are voidable if they (a) are incompatible with the obligations under the inheritance contract and (b) have not been reserved in the inheritance contract. 

New inheritance contracts to be concluded must therefore stipulate whether and to what extent the testator may make gifts to descendants and other persons after the inheritance contract has been concluded. Since the new rule also affects existing inheritance contracts, these must also be reviewed and adapted if necessary.

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Clarification for pillar 3a assets

Until now, the pension agreement (pillar 3a as bank savings = estate) and the pension insurance (pillar 3a as pension insurance ≠ estate) were treated differently from an inheritance law perspective. 

Now, all pillar 3a pension assets are not (or no longer) included in the estate. The testator can therefore choose beneficiaries independently of their inheritance status. However, any surrender value of the pension insurance as well as the capital in the bank savings will be added to the inheritance estate protected by the compulsory portion and is thus potentially subject to a reduction action (should the pension assets violate the compulsory portion of the legal heirs).

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Revision of stock corporation law

The revision of stock corporation law, which came into force on January 1, 2023, brings a large number of changes in the areas of share capital, general meetings, shareholder rights and reorganizations. Nadja Haldimann-Good presented the most important changes to you in the November newsletter(https://www.gfeller-partner.ch/news/news-zu-der-aktienrechtsreform).

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Associations in light of the revision of the Anti-Money Laundering Act (AMLA)

In 2016, the Financial Action Task Force (FATF) published the fourth country report on Switzerland, which criticized, among other things, the transparency regulations on charitable organizations. Essentially, incomplete regulations that pose a particular risk in connection with terrorist financing were criticized. Together with this report, corresponding recommendations were also proposed. Parliament subsequently passed a revised Federal Act on Combating Money Laundering and Terrorist Financing (Anti-Money Laundering Act, AMLA) to implement these recommendations, and certain provisions of the AMLA amendment have already entered into force.  

The revised Money Laundering Ordinance, which will come into force on January 1, 2023, contains changes to the law on associations that will impose additional obligations on many (especially charitable) associations. The transition period for implementing the new obligations runs until June 30, 2024. Against this background, we recommend that you check at an early stage whether there is a need for action at your association.

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Extended registration obligation

As a basic principle, an association may refrain from being entered in the commercial register as long as it does not operate a commercial business for its purpose or is not subject to auditing.  

With the revision, an association will in principle be subject to registration if it "mainly collects or distributes assets abroad, directly or indirectly, which are intended for charitable, religious, cultural, educational or social purposes". However, such associations are exempt from the obligation to register if neither the assets collected annually nor the assets distributed annually in the last two years exceed CHF 100,000, the distribution of the assets is carried out through a financial intermediary or at least one person authorized to represent the association is domiciled in Switzerland. If one of these exceptions applies, the association remains exempt from its registration obligation.

Maintenance of a membership directory

In future, associations subject to registration must keep a register of members. This must contain the full names/companies of the persons including addresses. In addition, the directory must be kept in such a way that it can be accessed in Switzerland at any time. Finally, all data on members must be kept for five years after a member has been removed from the register. 

It should also be noted that all associations subject to registration will in future be obliged to be represented by a person domiciled in Switzerland (analogous to the provisions of company law).

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II. taxes 

1. legal entities 

Withholding tax: reporting procedure within the group

In the case of withholding tax, the national reporting procedure is now possible within the group from a participation quota of 10% and for all legal entities that hold such a qualified participation. Previously, the required minimum participation rate was 20% and the reporting procedure was reserved for corporations and cooperatives. Now, foundations and associations can also apply for the national notification procedure, provided that the other requirements are met. 

The validity of the authorization for the reporting procedure in the international relationship is now five years instead of three years. The extended authorization period applies to all new authorizations issued or extended after January 1, 2023.

Value added tax: Increase of the turnover limit for exemption from the obligation to pay value added tax for sports and cultural associations

The turnover limit for the VAT liability of non-profit, voluntarily run sports and cultural associations and non-profit institutions will be increased from the previous CHF 150,000 to the new CHF 250,000. 

According to a rough estimate by the Federal Tax Administration (FTA), around 180 associations and non-profit institutions can have themselves deleted from the VAT register because they do not reach the new turnover threshold. This requires a written and timely deregistration with the FTA. Without or in case of late deregistration, the tax liability continues to apply.

2. natural persons 

Deduction for pillar 3a

For pillar 3a, the following maximum amounts that will be allowed as a tax deduction apply for the 2023 tax period:

 Taxpayers with 2nd pillar: CHF 7,056

Taxpayers without 2nd pillar: CHF 35,280

Increase in childcare expense deduction (from tax period 2023)

Starting with the tax period 2023, the proven costs up to a maximum of CHF 25,000 (until the end of 2022 CHF 10,100) for third-party care for each child can be deducted from the taxable income. The prerequisite for the deduction is that the child has not yet reached the age of 14 and lives in the same household as the taxpayer who provides for his or her maintenance. In addition, these costs must be directly related to the taxpayer's employment or education. 

In the upcoming 2022 tax return, the previous deduction of CHF 10,100 is still applicable (direct federal tax and cantonal and communal taxes).

If you have any further questions or would like to call on our assistance, please email our tax department.

In the end, we only retain from our studies what we apply in practice.

- Johann Wolfgang von Goethe -

We would like to congratulate Michael Schneider on successfully passing the examination as a certified tax expert.

Focused until the end of the exam and with the necessary perseverance - you have made it and can be proud of the result achieved! We wish you many new and interesting challenges on your way and much joy and success in your daily work!

Stock Corporation Law Reform

In June 2020, the revision of the Stock Corporation Act in the Code of Obligations (CO) was approved by Parliament. The new law will come into force on January 1, 2023.

Some of the changes mainly affect listed companies. In particular, there are new regulations regarding the proportion of women (target gender quota of 30% on the board of directors and 20% on the executive board) or compensation issues. In the latter case, the Ordinance against Excessive Compensation (VegüV), which became known as the "Minder Initiative" or "Rip-off Initiative", was incorporated into company law.

In the following, we would like to focus on the most important changes for non-listed SMEs.

Capital

• Cancellation of the minimum par value of the share capital
• Possibility to pay share capital in foreign currencies (determined by the Federal Council)
• (intended) takeover of assets in kind: the transparency requirements in the articles of incorporation regarding the assets taken over by shareholders or their related parties do not apply
• Introduction of a capital band: The Articles of Incorporation can now authorize the Board of Directors (BoD) to increase or decrease the capital within two lock-up periods for a maximum of 5 years.
• Capital reserves may be distributed if the statutory capital and retained earnings exceed half of the share capital recorded in the commercial register
• Permission to distribute interim dividends, provided that revised interim financial statements are available

Tax effects due to adjustments related to capital:

• even if the accounting is done in a foreign currency, the taxable equity and the taxable net profit must be converted into CHF. The closing rates published by the FTA at the end of the tax period (equity) or the average tax rates for the tax period (net income) are applicable.

General Meeting (GV)

• Possibility of virtual AGM, if suitable electronic tools are used
• Possibility of parallel implementation at several conference venues, provided that sound and image can be transmitted
• Implementation of the GV abroad is permissible under certain conditions
• Admissibility of circulation resolutions
• To convene an AGM, 10% of the share capital or - new - 10% of the votes are required. The previously required threshold of CHF 1 million no longer applies.
• Right of tranching upon (cumulative) holding of 5% of the share capital or votes (previously 10%)

Corporate Governance

Strengthening minority shareholders through

• Entitlement to written information outside the AGM, to be answered by the BoD within 4 months, and to inspect the books of account if this is necessary to exercise shareholders' rights and if the threshold of 5% of the share capital or votes is reached.
• Possibility of stipulating an arbitration clause in the Articles of Association

Redevelopment

• Duty of the BoD to act even in the event of imminent insolvency
• Notice of overindebtedness: tolerance period of 90 days, provided that there is a concrete prospect of reorganization
• Cancellation of the bankruptcy stay in the OR and integration into the composition proceedings SchKG

Next steps

The changes in the new stock corporation law may result in an adjustment of the Articles of Association and/or Organizational Regulations. Companies are therefore called upon to review and, if necessary, adapt these, for which a transition period has been granted until January 1, 2025.

If you have any further questions or would like to call on our assistance in reviewing the articles of incorporation and bylaws, please email our tax department.

Provisions for warranty obligations and major repairs

In order to record expenses or losses relating to the accounting period to be closed on an accrual basis, provisions can be formed in the company. Provisions are borrowed capital and must therefore be distinguished from value adjustments, which are adjustment items and serve to take account of the risk of losses on certain current assets (e.g. bad debt allowances). When forming provisions, the principle of accrual must be strictly observed and thus a catch-up of provisions from previous tax periods is generally excluded. 

Article 960e II of the Code of Obligations contains the following commercial law requirements for the creation of provisions:

• past event;
• expected cash outflow in future financial years;
• The amount of the cash outflow can be reliably estimated.

If the provision is no longer justified, it does not have to be reversed according to the CO. 

In order for the provisions to also be recognised for direct federal taxes, they must:

• informally be recorded in the books of account;
• be justified in business terms in material respects;

In contrast to the Code of Obligations, provisions that are no longer justified must be released, otherwise they are added to the taxable profit (taxed hidden reserve).   

Provisions are regulated differently at the cantonal level. This article shows some of the cantonal differences with regard to provisions for guarantees and major repairs.

Guarantee provisions

Warranty and guarantee obligations arise from contracts of sale and contracts for work and services in that the seller or manufacturer of an economic good is liable to the buyer for defects in the delivered item. The buyer's claims may be based on statutory or contractual warranty obligations or on business goodwill.

Provisions for guarantees serve to take into account guarantee obligations that actually or probably existed on the balance sheet date and whose fulfilment can be seriously expected, but whose extent is still uncertain. 

As a rule, the extent of the permissible guarantee provision must be estimated. It can be self-calculated and based, for example, on empirical figures from previous years. The assumptions must be substantiated and the basis for the calculation (e.g. extent of actual claims in the past) must be disclosed.

Provided that the company demonstrably provides warranty services and has no recourse claims, a lump-sum provision can be formed in most cantons (including BE, ZG, LU, SO, BL, BS, SG). The cantonal flat rate is usually 1% - 2% of the annual turnover with third parties. Some cantons set the rates per industry (e.g. for manufacturing companies, construction, Accounting- and auditing companies).

Provisions for repairs / major maintenance

In principle, provisions for equipment or buildings are not permissible, as reductions in value resulting from constant use and ongoing wear and tear are taken into account by the permissible depreciation. However, if damage has occurred in the previous business year and the repair can only be carried out in the following year, a provision is to be made to the extent of the presumed costs.  

Even in the case of major repairs to properties, e.g. renovation work that is actually planned in the near future, provisions can be made in most cantons. Many cantons allow a lump-sum provision without proof and link its calculation to the building insurance sum or the book value. The lump sum rates as well as the maximum duration for the formation of a provision vary from canton to canton.

In the canton of Bern, for example, a lump-sum provision of a maximum of 2% of the building insurance value is recognised and can be formed for a maximum of 8 years. The canton of Solothurn, on the other hand, does not apply flat rates for major repairs as a percentage, but only provisions for specific projects, which must be documented, e.g. by means of quotations, and can be spread over 2 years. The canton of Thurgau, among others, has another requirement, where no depreciation may be made on the object in question for the provision to be recognised.

Most cantons also know so-called upper limits for the reserve portfolio per property, e.g. the cantons of Zurich and Zug with 15%, the canton of Thurgau with 10% of the building insurance value or the canton of Lucerne with 5% of the book value.

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Due to the cantonal differences described above, we recommend that you carefully examine the regulations regarding provisions on the occasion of the annual financial statement so that the expense is recorded as realistically as possible, the tax burden is optimised and a possible set-off by the tax authority is avoided. We will be happy to advise you on this.

I. Tax-approved interest rates for the year 2022

Every year in January, the Federal Tax Administration (FTA) publishes the interest rates recognised for tax purposes for advances and loans in Swiss francs and in foreign currencies in two circulars (circulars no. 195 and 196; so-called safe haven interest rates). Compared to 2021, the interest rates for loans in Swiss francs from and to Swiss companies remained unchanged. In contrast, the permissible interest rates for loans in foreign currencies were increased, in some cases significantly, compared to the previous year.  

Tax-approved interest rates for advances or loans in Swiss francs

Tax-approved interest rates for advances or loans in foreign currencies

1. background

If loans from Swiss companies to their shareholders or other related parties (asset loans) do not bear interest or do not bear sufficient interest, this qualifies as a payment in kind to the extent of the insufficient interest. This is subject to withholding tax and, at the level of the company, for the purposes of profit tax as a profit anticipation to be offset. 

If, on the other hand, loans from shareholders or other related parties to Swiss companies (loans on the liabilities side) bear too high an interest rate, this constitutes a payment in kind subject to withholding tax to the extent of the excessive interest rate, as well as a hidden profit distribution to be offset against profit tax at the company level. The taxpayer must prove that interest rates agreed upon that deviate from these safe haven interest rates stand up to a comparison with third parties and are therefore in line with the market. 

If the loan is taken out or granted at the published interest rates and conditions (in particular provisions on hidden equity capital), the loans are deemed to be in line with market conditions in the calendar year without further evidence. In other words, there is no risk of tax consequences. 

2. loans in Swiss francs

For the assessment of an appropriate interest rate on loans in Swiss francs to participants or related third parties or from participants or related third parties, the FTA has based its calculation on the following interest rates since 1 January 2022:

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The FTA has also published separate interest rates for real estate loans from participants or related third parties to Swiss companies in Circular No. 195, which will not be discussed in more detail here. 

3. loans in foreign currencies

With a few exceptions, the FTA has in some cases significantly increased the permissible minimum interest rates for loans in foreign currencies from Swiss companies to participants or related third parties (asset loans) compared to the previous year. For example, in 2022 the permissible minimum interest rate for loans in euros is 0.5% (2021: 0.25%) and for loans in US dollars 2% (2021:1.25%). The adjustments to foreign currency interest rates reflect the rising inflation rates in many major economies and regions and the associated interest rate turnaround. 

Analogous to the circular for loans in Swiss francs, the same mark-up may be taken into account for operating loans (section 2.2 of the circular) from participants or related third parties to a Swiss company (passive loans). In any case, business-related proof must be provided as to why no obligation was entered into in lower interest-bearing Swiss francs. 

II. Safe Haven Interest Rates in Times of Negative Interest Rates

Although the interest rate on the Swiss Confederation's ten-year federal bond will show a positive yield in January 2022 for the first time in a long time, the interest rate level in Switzerland is still at a historic low (the key interest rate of the Swiss National Bank SNB remains unchanged at - 0.75%). 

In view of the negative interest rates that are due at Swiss banking institutions above a certain credit balance, it could be economically attractive for companies with significant liquidity reserves in Swiss bank accounts to grant loans below the minimum interest rate of the FTA or even interest-free loans to participants or related third parties. On the one hand, the company waives interest on the loan granted, but on the other hand avoids or reduces the burden of negative interest on bank balances.  

Although this procedure appears to make good business sense from the company's point of view, it cannot be recommended without reservation. The interest-free loans to participants or related third parties violate the minimum interest rate of 0.25%, which the FTA still prescribes as a safe haven interest rate for asset loans in 2022.  

The business argument that the granting of loans can avoid the threat of or actual negative interest rates is convincing in itself, but is not accepted by the FTA as the only argument to prove third market conformity. In the current low interest rate environment, loans are granted at historically low interest rates, but hardly ever without interest. The FTA's assessment of whether a loan interest rate that deviates from the Circular is considered to be in line with the third market is based on the specific circumstances of the individual case. The avoidance or reduction of negative interest rates on the part of the lender can be an argument, but successful proof depends on other factors. 

III. recognise the need for action (early) and benefit from it

In particular, we recommend companies that carry loans (on the assets or liabilities side) in foreign currencies on their balance sheet to review the loan agreements on an ongoing basis and especially with regard to the latest adjustments by the FTA as of 1 January 2022. The adjustment to the higher minimum interest rates also offers opportunities from a tax perspective, which is why an early and proactive approach pays off. The tax team at Gfeller + Partner AG will be happy to advise you on the subject of tax-recognised interest rates on loans and negative interest. Do not hesitate to contact us.

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Covid-19 has impacted many companies' bottom lines for both 2020 and 2021. While many sectors suffered a drop in sales, especially in the lockdown year 2020, others emerged as winners from the pandemic. With the Employer Contribution Reserve (AGBR), there is a possibility to close for both cases, albeit for different reasons.  

What is the employer contribution reserve (AGBR)?

Most companies employ staff who are subject to compulsory occupational pension insurance (BVG). The insured employees have to pay a maximum of half of the BVG contributions, the other half (or voluntarily more) is paid by the employer. The employer deducts the employee contributions monthly from the salary of the insured employee. The employer pays the employer contributions from its own funds and thus from its remaining liquidity, or - alternatively - from the previously accumulated contribution reserves, the so-called AGBR. 

Accumulation and use of the contribution reserves

The Confederation and the cantons allow the formation of LOB reserves up to 5 times the annual employer contributions. This means that if the employer's annual BVG contributions are CHF 20,000 in 2021, employer reserves of up to CHF 100,000 can be formed or increased to CHF 100,000 if AGBR were already formed in previous years. In order for the formation to be recognised for tax purposes, the contributions must be transferred to the pension fund in the following year, although most pension funds allow deposits up to 30 June. In the next five years, the company can use the liquid funds generated on an ongoing basis for other, e.g. operational purposes, since the payment into the LOB has already been made in advance.  

Although this payment must be made irrevocably by the company in order to be eligible for tax deduction, the AGBR does not yet constitute assets of the pension fund. From the company's point of view, it is an earmarked hidden reserve to which the pension fund has quasi access and can debit the required employer annual contribution to this account.  

For whom are AGBR suitable?

Primarily, the AGBR is suitable for financial statement design and long-term tax planning, in particular to compensate for cyclical fluctuations. It should be noted, however, that this is a cash-effective instrument. In order to be able to claim the provision for tax purposes, the payment into the pension fund must be made no later than 6 months after the annual financial statement. This assumes that the company has sufficient liquid funds. 

If the profit in 2021 has risen above average, which could be the case after the lockdown year in some sectors for various reasons - and if the liquidity planning allows it - the payment into the AGBR is an optimal instrument to bring forward the expenses of the next maximum five years and to charge them to the annual accounts in 2021. If higher purchasing costs and thus a decline in profits are to be expected due to the supply bottlenecks, the hidden reserves formed by this advance payment can be released and used, which will improve the annual financial statements and, above all, the liquidity of the following years.  

If you are considering optimising the annual financial statements, we will be happy to advise you in more detail about the possibility of AGBR.  

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Changes in the valuation of securities without market value (participations)

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Switzerland

Circular 28 "Guidelines for the valuation of securities without market value for wealth tax" undergoes a significant change. According to a decision of the Swiss Tax Conference (SSK), the calculation of the capitalised earnings value for operating companies will be adjusted for balance sheet dates from 1 January 2021 (i.e. financial years ending in 2021). The capitalised earnings value generally forms the main basis for the wealth tax value and was previously calculated on the basis of the SWAP rate and had remained stable at 7% over the past years. It now represents a 3-year average of the three years preceding the assessment year and is composed of the risk-free interest rate, a risk premium and an illiquidity surcharge. For the year 2021, a capitalisation interest rate of 9.5% is calculated, which currently reduces the capitalised earnings value by 26.3% (change in capitalisation interest rate / new capitalisation interest rate).

The basis for the net asset value is still the annual financial statements under commercial law, taking into account certain tax adjustments (e.g. official value of the properties instead of book value) and before taking into account STAF-related additional deductions and / or disclosure of hidden reserves.

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Canton of Bern

The Canton of Berne also adopts the adjustments described above, with the following additional specific adjustments: According to the practice of the Cantonal Tax Administration of Berne, for reasons of practicability, the previous year's tax value of securities without market value was used for the assessment of wealth tax, unless the taxpayer requested otherwise. While the 2019 taxable value was decisive in 2020, from the 2021 tax year onwards there will be a switch from the past to the present value as the taxable value. This means that the wealth tax value in 2021 must already be recorded in the 2021 tax return and forms the basis of the assessment in the current year.

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Tax consequences

The shareholders and partners of participations in SMEs are primarily affected by the change. The higher capitalisation rate currently results in lower capitalised capitalised earnings values of 26.3%, which fundamentally reduces the enterprise value and thus the taxable assets. The higher the capitalised earnings value in relation to the net asset value, the greater the effective impact.

The following example shows the influence on the enterprise value and thus the tax value, which decreases by 15.5%:

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The other side(s) of the coin

While a lower wealth tax value - in the above example around CHF 160,000 less than before - is basically good news for the annual tax return, this adjustment as well as the change in the canton of Berne affects strategic tax optimisation:

- Purchase price determination for succession arrangements, the pricing of which is based on the tax value in a simplified manner

- At best, a poor annual result in 2020, which is marked by the Corona lockdown, cannot be taken into account sufficiently due to the changeover that is now taking place.

In order to get the best out of these effects, which at first glance appear to be disadvantageous, both in terms of business management and taxation, we are happy to offer you our advice. Do not hesitate to contact us with your questions.

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Swiss people reject abolition of emissions levy

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Yesterday, the Swiss people clearly rejected the bill "Amendment of the Federal Act on Stamp Duty" with 62.7%.

The previous system thus remains in force unchanged. Accordingly, the issuance and increase of domestic equity securities (shares, capital contributions, cooperative shares, etc.) for or without consideration is still subject to the issue tax of 1% above a one-time exemption limit of CHF 1 million and apart from the legally standardised exceptions such as restructurings. Grants and contributions made by shareholders without issuing equity securities also remain taxable. 

The tax team at Gfeller + Partner AG will be happy to advise you on the timely and formal declaration of the emissions levy as well as on the examination of whether a specific individual case is an exceptional circumstance that is fully or partially exempt from the emissions levy (e.g. reorganisation, restructuring). Do not hesitate to contact us.

Outlook

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The now rejected revision of the Federal Stamp Duty Act concerned the issue duty; the turnover and insurance duties were not part of the referendum bill.

On 17 December 2021, Parliament passed a reform of the withholding tax and stamp duties. The reform is intended in particular to strengthen the Swiss capital market. The central points of the reform are the abolition without replacement of the withholding tax on interest on newly issued bonds and the abolition of the turnover tax on domestic bonds. The turnover tax on the sale of participations is also to be abolished.

Provided there is no referendum against the bill, the abolition of withholding tax on bond interest will come into force on 1 January 2023. The Federal Council will determine the entry into force for the remaining provisions of the reform. We will be happy to keep you informed about this and other legislative revisions on this channel or during a personal discussion.

Increase of the private share for business vehicles as of 01.01.2022

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As of 01.01.2022, the flat rate for the private share of the business vehicle will increase from 0.8% to 0.9% per month. What does this increase mean if you as an employee also use a business vehicle for private purposes or if you as an employer provide your employees with a business vehicle that may be used privately?

Here are the most important effects:

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Consequences for employers:

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1. the box "F" must still be ticked if a business vehicle is used free of charge for transport between the place of work and residence.

2. the note on the proportion of field work and home office days in the salary statement under item 15 is omitted.

3. social security contributions and VAT will increase minimally.

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Consequences for employees:

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1. taxable income increases slightly.

2. the declaration and thus the offsetting of the commute as income in the tax return is omitted (para. 2.21).

3. the professional expenses deduction (travel costs) with the Confederation of max. CHF 3,000 is already taken into account in the lump sum.

4. the tax burden is lower for long commutes or a low proportion of outside work, but increases for short commutes and a high proportion of outside work.

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Private use can still be effectively calculated and proven by means of a driver's logbook.

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Gfeller + Partner AG expands tax department

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Due to the steadily increasing demand for advisory services, we decided to add two more colleagues to the existing tax department with Michael Kistler, Nadja Haldimann and Sara Konieczna.

We are very pleased that Michael Schneider (33), lawyer/advocate, LL.M. and prospective tax expert, will be joining us in January 2022 and that we will be welcoming Reto Affolter (35), certified tax expert and Master of Law, in March of the following year. In addition to their expert-level training, both will also bring professional experience from a wide-ranging SME environment.

This means that we are ideally equipped to deal with all the tax issues of our existing and potential clients even more quickly and with our customary expertise. Be it succession planning, restructuring or tax optimisation; the time is right! Get in touch with us now to realise pending or postponed matters quickly and in a tax-optimised manner. We will be happy to support you.

Gfeller + PartnerAG

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Important changes for residential homes, day centres and workshops for adults with an impairment in the canton of Bern from 2022 onwards

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In the circular of September 2021, the Health, Social and Integration Directorate (GSI) of the Canton of Bern announced various changes to the annual service contract 2022. These include the obligation to set up an internal control system as well as explanations on how to deal with excess coverage (fluctuation fund).

As auditors of various institutions, we have the necessary knowledge and experience to support you in the implementation of these changes. With this newsletter, we would like to draw your attention to important points and give you some tips for implementation.

Establishment of an internal control system

October 2022 Update:

In the November 2021 Newsletter, we reported in detail on the obligation to establish an adequate internal control system. The establishment of an adequate internal control system is now only recommended by the circular of the GSI of the Canton of Bern of August 2022. Thus, the originally required audit of the internal control system by the statutory auditor is no longer required.

Fluctuation fund (accumulated surplus/shortfall)

The explanatory note to the annual performance contract 2022 defines a maximum ceiling (15% of the total expenditure of the residential/special school area and 25% of the total expenditure of the workshop area). Furthermore, surpluses up to a maximum of 3% of the total expenditure of the residential/special school area and 6% of the total expenditure of the workshop area may be allocated to the fluctuation fund. What is new is that the fluctuation fund can only be accumulated up to the maximum ceiling. Any surpluses in excess of this must be reimbursed and recognised as a liability. Legacies or donation funds that are not earmarked for a specific purpose are also taken into account when calculating the service charge. If an institution has donation funds and legacies that are not earmarked for a specific purpose, it must be checked whether they can be made subject to earmarking by means of donation regulations.

If the balance of the equalisation fund is negative, this is now to be shown in account group 28 "e.g. voluntary retained earnings or accumulated losses" as a separate item and no longer under account group 24.

The Circular does not deal with another innovation that should be addressed relatively soon: As of 1 January 2023, all GSI-financed institutions must (as of today) prepare their annual financial statements in accordance with Swiss GAAP FER 21 ("Accounting for Charitable Nonprofit Organisations"). Annual financial statements according to FER 21 are more comprehensive than the previous ones according to the Code of Obligations. This means that in future a cash flow statement and a statement of changes in capital must also be prepared. In addition, the appendix to the annual financial statement will be significantly more extensive and detailed (including a statement of changes in fixed assets, etc.). When applying ARR 21 for the first time, it should be noted that the previous year's balance sheet (as of 31.12.2022) must also already be prepared in accordance with ARR 21. The preparation of the previous year's income statement and the other components of the annual financial statement is not explicitly prescribed for the first-time application in accordance with ARR; however, it can be recommended.

We recommend that you start the project "conversion of accounting" early and plan sufficient time reserves. It is advantageous to prepare internal financial statements according to the new standard as early as 31.12.2022. We would be happy to support you in this project with our knowledge and experience.

We hope to be able to give you some helpful input with this newsletter.

Do not hesitate to contact us if you have any questions.

It is not enough to know, one must also apply.

It is not enough to want, you also have to do.

-Johann Wolfgang von Goethe-

We would like to congratulate Moana Caspar and Simona Straubinger on successfully passing the examination as fiduciary experts.

Both of them applied their knowledge and successfully proved it by passing their exams. You can be really proud of the result you achieved! We wish them both many new and interesting challenges on their further way, the necessary self-confidence as well as much joy and success in their daily work!

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The existing regulation on the meeting of companies has been extended until 31 December 2021. General meetings may continue to be held in writing or online.

Chapter 4: Meetings of societies

Art.27

1) In the case of meetings of companies, the organiser may, irrespective of the expected number of participants and without observing the notice period, order that the participants may exercise their rights exclusively:

a. in written or electronic form; or

b. by an independent voting representative designated by the organizer.

2) The organiser shall make a decision during the period referred to in Article 29 paragraph 4. The order must be notified in writing or published electronically at least four days before the event (version in accordance with No. I of the V of 11 Sept. 2020 (extension; test costs), in force since 14 Sept. 2020 (AS 2020 3695)).

Art. 29 Entry into force and period of validity

1) This Ordinance shall take effect at 00:00 hours on June 22, 2020.

2) It shall apply until 13 September 2020(version in accordance with No. I of the V of 11 Sept. 2020 (extension; test costs), in force since 14 Sept. 2020 (AS 2020 3695)).

3) ... 2)

4) The period of validity of this Regulation shall be extended until 31 December 2021 .

From 1 January 2021, new deadlines and fees will apply in the canton of Berne.

Private individuals / Self-employed / Farmers

Deadline extension to July 15:

• Online: Toll Free

• Written (e-mail, letter), telephone, counter: CHF 20

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Deadline extension to September 15:

• Online: CHF 20
• Written (e-mail, letter), telephone, counter: CHF 40

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Deadline extension to November 15:

• Online: CHF 40
• Written (e-mail, letter), telephone, counter: CHF 60

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Extension of the deadline for virtual tax subjects (partnerships, communities of heirs and co-owners, etc.):

• Online: free of charge
• Written (e-mail, letter), telephone, counter: free of charge

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Extend deadline as a legal entity

Legal entities such as corporations, cooperatives, associations, foundations and other legal entities may file an extension of time until no later than 3½ months after the filing deadline or 10½ months after the close of business.

You must request the extension online or in writing before the printed deadline .

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Extend deadline in writing

Requests for an extension of the deadline can be submitted in writing either by letter or by e-mail. Send your request to the address printed on the tax return. 

No extensions of time limits can be recorded bytelephone . 

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Deadlines and extensions

Regular submission deadline 7 months after closing:

• Example: Closing at the end of the year: Deadline for submission is 31.07. of the following calendar year.
• Fees online: CHF 0
• Fees in writing: CHF 0

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Extension of time + 1 1/2 months (maximum):

• Example: Closing at the end of the year. 7 months plus 1 1/2 months --> Deadline for submission is 15.09. of the following calendar year.
• Fees online: CHF 0
• Fees in writing: CHF 20

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Extension of time limit + 3 1/2 months at the latest:

• Example: Closing at the end of the year. 7 months plus 3 1/2 months--> Deadline for submission is 15.11. of the following calendar year.
• Fees online: CHF 20
• Fees in writing: CHF 40

Note

The fee is invoiced in the final statement. It is worth submitting your tax return in good time or applying for an extension of the deadline in good time. You save the reminder fee.

Legal entities domiciled outside the Canton of Berne do not require an extension of the deadline.

Welcome to the third part of this year's autumn event of Gfeller und Partner AG.

We are pleased to be able to present you the next film contribution entitled "Additional deduction for research and development from 01.01.2020":

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If you have any questions, please contact Michael Kistler.

Welcome to the second part of this year's autumn event of Gfeller und Partner AG.

We are pleased to be able to present you the next film contribution entitled "Abolition of holding privilege":

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If you have any questions, please contact Michael Kistler.

Tax reform and AHV financing (STAF), current implementation findings

COVID-19 presents us with challenging situations every day. This means that even we are not able to hold our annual autumn event as usual. However, as we still think there are some current topics that we would like to inform you about, we have decided to take a different approach.

Our tax expert Michael Kistler has put together some exciting information on the subject of "Tax News" for you in several short sequences. We would be pleased to present this to you in various short film contributions.

You can find all film contributions on our YouTube channel. You will be informed by newsletter when a new entry is uploaded.

Now we are pleased to present you the first film contribution with the title "Tax reform and AHV financing (STAF), current implementation findings":

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We wish you good entertainment and are already looking forward to welcoming you again with the next film contribution - stay healthy!

If you have any questions, please contact Michael Kistler.

You will find all further information in our job advertisement.

Mrs. Barbara Stämpfli will be happy to answer your questions!

Impact of the COVID pandemic on social security

When assessing the impact of the COVID pandemic on the social security systems, in particular the Swiss pension funds, not only the effects on the investment markets must be considered. This would be too brief. Macroeconomic and demographic developments can also have a corresponding influence on the financing and benefits of the individual social security funds. In addition to the effects of asset investments, we try to make a rough interpretation of the other major influencing factors and their possible consequences for the 1st pillar, and in particular for the 2nd pillar.

Investment markets in the first 7 months

The individual pension funds can define investment strategies of varying degrees of aggressiveness based on their defined risk budget. The better the structure of the fund, the greater the possible scope for the executive bodies to take risks in determining the investment strategy and thus to suffer greater fluctuations in investment performance. The Pictet LPP indices published are suitable for assessing the potential results of pension funds during the pandemic. The Pictet LPP indices track mixed portfolios with varying proportions of equities before asset management costs, taking into account the BVV 2 investment guidelines. The results of the individual indices as at the end of July 2020 show that although the pension funds suffered a massive loss on their investments in the first quarter, they had almost made up for these losses by the end of July. This is illustrated by the following overview:

Nevertheless, pension funds must primarily finance the interest obligations of active employees (0.75% according to the proposal of the BVG Commission), pensioners (between 1.25% and 2.5% for most funds) and often also excessive life expectancies. Nevertheless, an overall negative situation is emerging for the year 2020.

Impact on financing and benefits in general

An analysis of the deaths of the Swiss population over the last 5 years reveals a temporary increase in mortality in the 65+ age group, while there is hardly any statistical variation among the young (65). While in 2020 the covid-19 pandemic is the reason for this high mortality, in 2015 + 2017 this is the strong seasonal flu wave. However, the experience of the first wave of covid infections, especially the number of deaths, does not lead to a permanent reduction in pension payments despite the excess mortality and thus, surprisingly, hardly any reduction in expenditure for pension insurance companies. At best, excess mortality in 2020 will lead to a marginal technical gain, which will, however, not or hardly be felt in the structure of the insurance funds.

Will everything remain the same in the area of AHV benefits? Considering the influence of Covid, the answer to this question is basically yes. However, demographic developments remain the problem: the retirement of the "baby boomers" will follow in the next few years and will place a heavy burden on the AHV's redistribution result.

The impact of Covid on disability insurance is still difficult to assess. Experts expect the pandemic to lead to a higher number of prolonged incapacities to work and subsequent effects on disability. However, it will only be possible to conclusively assess these effects in the long term, and they indicate initial trends.

As expected, the short-term effects on the ALV are the strongest, even though the short-time work compensation also represents insured wages and relieves the fund of its own burden. So far, applications for short-time work have been submitted for an estimated 2.0 million employees. In contrast, the financial crisis was comparatively minor, with fewer than 100,000 applications. In addition, the experts expect the pandemic to lead to a rising unemployment rate, which will place an additional burden on the social welfare system. In general, it should also be noted that first-pillar insurance schemes are also expected to show negative performance results and will not be able to contribute to the financing of benefits in 2020.

And the second pillar in particular

Due to the continuing high volatility in the investment markets, low investment returns can generally be expected in 2020 and thus lower interest rates on savings capital than in 2019. This is also the result of the participation models that are now widely used by the health insurance funds, which will not leave the responsible bodies any leeway for better interest rates.

As mentioned, the effect of excess mortality is small and any short-term technical gain will be corrected by a medium-term undermortality. This scenario can be reliably assumed provided that the current pandemic does not lead to massively higher mortality or regular pandemics.

With regard to the effects on the health insurance funds, a general distinction must be made between short-term and long-term effects. In the short term, there is uncertainty regarding the payment of contributions and the risk of default on contributions from affiliated companies; this risk is already being felt in the course of the pandemic. In addition, the partial, temporary loss of rental income from commercial properties means that there is a lack of income, which clouds the prospects for returns. In the long term, and as a result of the damage caused to the economy as a whole or to the industry, employees and employers are likely to be reluctant to improve their performance and to compensate for the loss of performance (for example through low interest rates or reductions in conversion rates). Finally, pension funds must prepare themselves for the fact that the potential return on pension assets will continue to decline due to the economic recession.

Summary

In the current crisis, pension funds have proven to be stable and make a significant contribution to safeguarding pension systems. The coverage ratios are generally still at a high level, also thanks to the good last investment years, and a large part of the funds are still in surplus cover. The risk of restructuring and partial liquidations with insufficient cover can currently be classified as low.

The challenges of the second pillar have not changed due to the pandemic. Even though the maturity yields of risk-free German government bonds rose slightly in March 2020, we are still in an interest rate environment that is damaging to the 2nd pillar. The redistribution between the generations is still gigantic, mainly because of the benefits promised by law, which are too high, and the system remains under pressure. The main danger from the pandemic for the 2nd pillar is that the urgent reforms will be politically delayed due to the lack of focus. This must be avoided as a matter of urgency.

Like Daniel Scheurer,Christian Zwahlen is a certified public accountant and has worked for our company for about 10 years.

On behalf of the Management Board and the employees, I would like to thank Daniel Scheurer for his many years of valuable and far-sighted work on behalf of our company. I wish the new member of the Executive Board much joy and satisfaction in his new function.

There are different deadlines for objections

In accordance with the instructions on appeals enclosed with the opening, an objection to the increase in the AW must be submitted to the Official Valuation Division within 30 days of opening. There is little time left for the openings at the end of July. The next opportunity for an appeal against the new AW will only be possible with a new valuation.

The situation is different for the increase in imputed rental values. If an objection to this increase is considered, this will only be possible with the regular tax assessment 2020.

Considerations when considering objections against the official value

The AW and the imputed rental value of a property should be aligned with the market value and the market rental value of comparable properties in the same area within a generously defined range. In extreme cases, an AW is thus justified at almost the market value, i.e. if the property could be sold at a price above the new AW, the chances of an objection being upheld are diminished.

The following considerations help to weigh up the success of an objection:

• The property was recently purchased or built at a price below the new AW. (In case of low prices among family members, purchase prices to third parties are decisive).
• In the neighbourhood, similar properties (size, age, construction quality) have been put up for sale or sold at a significantly lower price.
• Errors in the evaluation standards

It should be noted that the objection must be accompanied by appropriate evidence. Likewise, in the case of real estate in joint ownership (e.g. communities of heirs, simple partnerships), the signatures of all owners involved are required.

Examination of the valuation standards

At most, alterations were made which would lead to a lower AW, or the protocol drawn up by the appraiser at that time does not reflect the current situation. To check this information, you need the recording log and the object log "E". Both can be obtained from the municipal administration of the place where the property is located. These two documents are also necessary for any objection against the imputed rental value that may be considered, which would have to be made with the ordinary assessment. How the valuation standards for the AW or the imputed rental value can be checked is explained in the "Notes on the tax valuation system for land and property" starting on page 12.

Evaluation standards https://www.sv.fin.be.ch/sv_fin/de/index/navi/index/steuersituationen/kauf-verkauf_liegenschaft/amtlicher_wert.assetref/dam/documents/FIN/SV/de/ab_nichtlandwirtschaftliche_bewertungsnormen-an20_de.pdf

Explanations on the evaluation system https://www.fin.be.ch/dam/documents/FIN/SV/de/Wegleitungen/Aktuelles_Steuerjahr/wl_erl-amtliche-bewertung_de.pdf. Information from the tax administration https://www.sv.fin.be.ch/sv_fin/de/index/navi/index/steuersituationen/kauf-verkauf_liegenschaft/amtlicher_wert/allgemeine-neubewertung20.html

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August 2020 update: short-time working compensation

On 12 August 2020, the Federal Council decided to retain the simplified procedure for the advance notification of short-time working and the summary procedure for the settlement of short-time working compensation (KAE) until the end of December 2020.

Therefore, only the COVID 19 forms are to be used for KAE until 31 December 2020, irrespective of the justification given by KAE.
From 1 September 2020, the maximum duration of short-time work of 3 months applies again. Consequently, all short-time work permits that are older than 3 months at this point in time (i.e. that were granted before 1 June 2020) will lose their validity as of 31 August 2020. The companies concerned that continue to rely on short-time work from 1 September 2020 onwards must submit a new advance notification. This must be submitted to the cantonal office at least 10 days before the start or continuation of short-time work.
Further important information can be found at SECO at https://www.arbeit.swiss/secoalv/de/home/menue/unternehmen/versicherungsleistungen/kurzarbeit-covid-19.html.

If you have any questions, please contact us at any time.

Update: March 2020: Information on short-time working

Below you will find our updated article on the possible introduction of short-time working.
The latest changes are shown underlined.

Who is entitled to benefits?

Employers for employees who

• have completed compulsory education.
• but have not yet reached the AHV retirement age
• are in an employment relationship which has not been terminated.

In addition, the following employees are also entitled to benefits:

• Employees who are unable to carry out their work as a result of a ban on operations imposed due to the coronavirus.
• Workers quarantined due to coronavirus
• Employees who are paid by the hour.

The following employees are also entitled to benefits:

• Persons with authoritative decision-making powers and their spouses (AHV wage total maximum CHF 3,320.00 for full-time employees)
• Employees on fixed-term contracts, temporary work and apprentices
• Employees do not have to reduce their overtime first before they can benefit from short-time work compensation.

Employees who cannot perform their work for personal reasons, such as illness, fear of infection or family obligations (e.g. caring for a family member in case of illness, looking after children when schools or after-school care centres are closed) are not entitled to short-time work compensation (KAE).

Further information on this can be found in the document Compensation for loss of earnings, which was published by the Federal Social Insurance Office FSIO on 20.03.2020.

How much salary must the employer pay for short-time work and what support can he expect?

• 80% of the loss of earnings must be paid on the payment date (including the contractually agreed regular allowances).
• The hours worked must be paid at 100%.
• The unemployment insurance fund subsequently compensates the company for 80% of the lost hours. The employer's contribution to AHV-IV, EO and ALV for the lost hours is reimbursed by the unemployment insurance fund.
• However, the employer is obliged to pay the social security contributions always on the wage that would have been paid without the short-time work.

How can holidays be taken during short-time work?

• Holiday cover is possible.
• However, the holidays must be paid 100% by the employer and cannot be accounted for as short-time work.

Waiting period

• The waiting days (at the employer's expense) do not apply.
• The accounting period is one calendar month.

Maximum term of subscription

• Principle: KAE is paid for a maximum of 12 months within a 2-year period.
• Companies with a loss of working hours of more than 85% can receive KAE for a maximum of 4 months.

Procedure

1. Pre-registration apply for short-time work

• Questions 1-8 must be answered individually.
• For question 7, it is essential to choose the competent unemployment insurance fund.
• Summary answers to questions 9a (company's field of activity), 11a (justification) and 11c (postponement of contract deadlines).
  Question 10b (monthly turnover in the last two years) no longer needs to be answered.

In the case of the justification "coronavirus", the pre-notification period is 3 days instead of the usual 10 days.

• No answer to the remaining questions in paragraphs 9-12.
• The extract from the commercial register does not have to be submitted.
• The form "Consent to short-time work" does not have to be submitted, but the employer must confirm in writing in advance that all employees affected by short-time work agree to the introduction of short-time work.
• The sales figures are no longer required.

2. Submission

• By e-mail to rechtsdienst.ava@be.ch
• By post to the Unemployment Insurance Office, Legal Service, Lagerhausweg 10, 3018 Berne

3. Apply

• form must be submitted to the competent unemployment insurance fund within 3 months of the end of the accounting period.
• The following documents must be submitted with the completed application for short-time work compensation for coronavirus:
• Payroll for short-time work.
• Hourly reports must be kept so that the economically induced lost hours can be determined.
• The details of the target hours, the economically induced lost hours and the wage total must be documented, for example, by suitable documents such as time sheets and payroll journals.
• Enclosures: operational documentation on the
• Target hours.
• economically induced lost hours and
• to the payroll.
• There are additional simplifications. The following forms do not need to be enclosed:
• Settlement of short-time work (form 716.303)
• Reports on economically induced lost hours (form 716.307)

Further answers are provided by the information on short-time work compensation for employers. In addition, please read the FAQ on compensation for loss of earnings in the event of measures against Corona (short-time work) and the overview of the package of measures to cushion the economic consequences.

Summary

In principle, self-employed persons and legal entities domiciled in Switzerland have the possibility of an additional tax deduction if they conduct research and development in Switzerland. The canton must create a corresponding legal basis for this so that this additional deduction is available for cantonal and communal taxes from the tax period 2020 (or later, if necessary). The basis for the calculation of this additional deduction is, on the one hand, the demonstrably incurred personnel expenses for research and development and contract research in Switzerland. The corresponding data/evaluations on research and development or its personnel expenses or contract research would then have to be prepared for fiscal year 2020.

Definition Research and development

The basis for the additional deduction is scientific research and science-based innovation in accordance with Art. 2 FIFG (Federal Act on the Promotion of Research and Innovation):

Scientific research:

According to the OECD Frascati Manual 2015, scientific research includes the following cumulative principles:

• Generation of new knowledge (novel);
• Based on original, non-obvious concepts and hypotheses (creative)
• Uncertainty in relation to the final result (uncertain);
• Following a plan and budgeted (systematically);
• Leading to results that are reproducible (transferable and/or reproducible)

Science-based innovation:

Art. 2 let. b FIFG defines innovation as the development of new products, procedures, processes and services for the economy and society

1. through research, in particular application-oriented research and
2. by using their results.

Personnel expenses

This deduction is calculated on the basis of personnel expenses and a flat-rate surcharge of 35% for material, investment and depreciation costs, rent and other overheads. According to the analysis of the SSK, the personnel expenses mentioned here are based on the Swiss manual of Audit (Volume "Limited Audit", Zurich 2014, Part IV Section 3.6). Accordingly, this term includes salary and social security expenses, gratuities, long-service awards, bonus programs, and training and continuing education.

Qualifying employees for the personnel expenses for research and development to be considered

The decisive factor is the actual function and direct activity of the employee - not the formal qualification or level of education.

In its analysis, SSK gave the following examples:

Qualifying activities and employees (positive list):

• carry out scientific and technical work for a research and development project (planning and conducting experiments or surveys, building prototypes, etc.)
• plan and manage research and development projects;
• write interim and final reports on research and development projects;
• provide internal services directly for research and development projects (e.g. project-specific IT or library and documentation work)
• provide direct support for financial and human resources management for research and development projects.

However, employees who perform indirect support or auxiliary activities do not qualify as research and development personnel, e.g:

• specific services for research and development provided by central IT departments and libraries
• Services of central finance and human resources departments for research and development projects and research and development personnel;
• the provision of security, cleaning, maintenance, canteen services, etc. to units carrying out research and development;
• in the production process, as well as activities upstream and downstream of it;
• for the monitoring of plants and for quality management;
• as support activities for research and development such as IT infrastructure management;
• for general services within the company from other activities not directly related to research and development, such as purchasing, sales, marketing, accounting, human resources and company management;
• for approval, licensing, certification or type testing.

Contract research

If research and development is carried out within the framework of contract research in Switzerland, 80% of this additional deduction can be taken into account. However, this assumes that the company which carries out contract research does not itself claim this expense for the additional deduction for research and development.

Simplified example

Research and development-related personnel expenses TCHF 1'000

Flat rate surcharge 35%: TCHF 350

Plus contract research in Switzerland

• Only permitted if the contract researcher himself does not claim the
  additional deduction TCHF 600
• Permitted quota 80%: TCHF 480

Total basis of calculation: TCHF 1'830

Additional deduction for research and development: TCHF 915

Principle of documentation

Taxpayers must provide evidence of qualifying research and development expenditure. This also applies to contract research for the contracting company.

Analysis SSK

Further information on the measures relating to payment relief can be found in the following document: Circular on direct federal tax measures.

1.) COVID-19 credit up to CHF 500,000 can be granted if the self-employed person or legal entity (excluding agriculture) declares that

a. was founded before March 1, 2020;
b. is not in bankruptcy or composition proceedings or in liquidation at the time of filing the application;
c. is economically significantly impaired due to the COVID 19 pandemic, in particular with regard to its turnover, and
d. has not already received liquidity guarantees based on the emergency legal regulations in the areas of sports or culture .... at the time of filing the application.

• The annual interest rate is 0.0%.
• The loan granted must be fully amortised within 5 years.
• Amortization: 5 years. In the event of considerable hardship for the borrower, the term may be extended once by the participating bank for two years with the consent of the guarantee organisation.

2.) COVID-19-Credit Plus up to CHF 20'000'000 can be granted if the self-employed person or legal entity (excluding agriculture)

a. submits the above-mentioned declaration and has a company identification number (UID number) and
b. the applicant's bank makes a positive decision according to a credit check customary in the industry, taking into account the joint and several guarantee, and confirms this to .... to the guarantee organisation.

The joint and several guarantee is reduced by the amount of the loan already described above under point 1). In general, 85% of the Credit Plus for the portion exceeding CHF 500,000 is secured by the Swiss Confederation. The lending bank participates in the loan with 15%.

• The annual interest rate for current account limits and for advances with a fixed term is 0.5% on the portion secured by the Federal Government.
• The loan granted must be fully amortised within 5 years.
• Amortization: 5 years. In the event of considerable hardship for the borrower, the term may be extended once by the participating bank for two years with the consent of the guarantee organisation.

3.) A joint and several guarantee is excluded if

a. the applicant's sales revenue in 2019 exceeded CHF 500 million; or
b. the credit to be guaranteed would be granted for new investments in fixed assets that are not replacement investments.

4.) For the duration of the joint guarantee, the following actions, among others, are excluded:

a. Dividend distributions and bonuses and repayment of capital contributions.
b. Granting of loans on the assets side or their refinancing of personal and shareholder loans, with the exception of the refinancing of overdrafts accumulated since 23 March 2020 .... with the bank that grants the loan guaranteed under this Regulation.
c. the repayment of group loans.

5.) Submission office
https://covid19.easygov.swiss/

6.) Form COVID-19 Credit Agreement (must be filled out and submitted for COVID-19-Credit and COVID-19-Credit Plus)

7.) Penalties
Fines of up to CHF 100,000

• if one of the above-mentioned credits is obtained with false information, or
• if the credit funds are used for actions in point 4 above.
  

According to this law, organisers (usually the competent bodies of a legal entity) of meetings of companies required by law or by the articles of association can take measures to ensure that participants can exercise their rights in compliance with the FOPH's regulations on hygiene and social distance. To this end, they may order, contrary to the relevant legal requirements, that the exercise of rights may only be carried out in writing or in electronic form or through an independent proxy appointed by the organiser.

Based on Art. 6a para. 2 of COVID-19 Regulation 2 (of 16 March 2020), the Company, as the organiser of a General Meeting, is therefore entitled to hold the General Meeting electronically. To this end, participants must be informed in writing of the measures referred to in paragraph 2 at least four days before the meeting is held, so that they are aware of the formalities and can make appropriate preparations to safeguard their rights. Instead of being informed in writing, participants may also be informed of the measures by electronic publication (e.g. by posting them on the company's website), in which case this information must also be provided at least four days before the meeting.

Sources:

• COVID-19 Regulation 2
• Explanatory notes (as of 18 March 2020, 3 p.m.)

In the past, it has often been criticised that tax deductions can "fall into the void" if the deductions in the same year exceed the income. This has now been taken into account: from 2020, any cost surplus can be carried over to the two following years and claimed there. The decisive factor is net income (taxable income less expenses and general deductions).

In the future, costs for energy saving measures can therefore ideally be claimed in full.

Now also the dismantling costs in view of a replacement construction are included in the tax-deductible maintenance costs.
If you are planning a replacement building, you can also deduct these costs from 2020.

Read more in issue 5 / November 2019 of the Tax Administration of the Canton of Bern: 10 minutes

You can find more information here: FDF - Simplified taxation of private use of company cars.

From the point of view of social security law, it must be decided in the relationship between Switzerland and the EU to which social security system the board of directors is to be subject (the one in Switzerland or its country of residence in the EU). Since the activity of the Board of Directors qualifies as employment (gainful employment) from the point of view of social security law and, in this constellation, is decisive for the responsibility of the social security system, the Board of Directors is to be treated as if all its income were earned in Switzerland. Consequently, all income is to be subject to the Swiss social security system. The company in Switzerland which pays the Board of Directors' remuneration is only required to collect and pay social security contributions on this amount.

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Should you have any further questions or require additional information on the subject, please do not hesitate to contact us.

Outsourcing of payroll accounting has therefore increased continuously in recent years and is a need of many SMEs. A considerable number of customers of various sizes and from a wide range of industries have entrusted us with the processing of their wages. Since 1 January 2018, we have been processing our payroll accounting with Topal Payroll software. This is a Swissdec certified software with many practical functions and evaluations for payroll professionals. The Swissdec certification ensures that payroll accounting fulfils the requirements for correct calculation and settlement with the social insurance companies, and that withholding tax statements and annual salary statements (AHV, UVG etc.) can be transmitted electronically (ELM). At the same time, additional individual wage types for industry-specific requirements can be created at any time, which ensures a high degree of flexibility.

The program has a clear structure and is easy to use, which in turn has a positive effect on processing efficiency. Variable wage components can be entered in advance or carried forward and reused. Routine tasks are supported by assistants who guide step by step through the respective process. All settlements for AHV, KTG, UVG/UVGZ, QST and FAK as well as wage statements can be generated at the push of a button. Further functions such as the entry of cost centres and a wide range of evaluations are also possible. Automatic posting to (Topal) financial accounting is also possible.

The use of professional software accompanied by competent processing significantly reduces not least the risk of set-offs in the event of an AHV or SUVA revision. We would be pleased to support you in outsourcing your payroll accounting or in converting the software to Topal Payroll.