Switzerland’s Package of Tax Relief Measures in Response to COVID-19 State and Local Tax

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Switzerland’s Package of Tax Relief Measures in Response to COVID-19

Switzerland’s Package of Tax Relief Measures in Response to COVID-19

In March 2020, the Federal Council of Switzerland decided on a comprehensive package of measures to soften the economic impact of COVID-19. 

By April 2020, federal funding of over CHF 40 billion (USD 41 billion) was allocated to the financial aid programs with the aim to a) maintain employment, b) secure wages and c) support the self-employed.

What Specific Programs Are Offered by the Swiss Government?
  • Liquidity support for companies: through emergency aid using bridging loans of up to five to seven years in length (dependent on hardship). Companies founded before March 1, 2020 may receive loan amounts of up to 10% of 2019 sales (or a maximum of CHF 20 million) quickly and easily. 
    • COVID-19 credit: amounts of up to CHF 500,000 are to be paid out immediately by banks (with 100% federal guarantee) at 0% interest. It is estimated these loan amounts will cover over 90% of Swiss companies affected by COVID-19.
    • COVID-19 credit plus: amounts in excess of CHF 500,000 are 85% guaranteed by the federal government (15% by the bank) at 0.5% interest, and applications require a brief, but closer examination by the bank. 
    • New for startups: On April 22, 2020, the federal government is making liquidity assistance available to pre-revenue startups, addressing a major gap.
  • Social security contributions deferral: Companies and the self-employed are granted temporary, interest-free payment deferral for social security contributions. As length of deferral is unspecified, companies and individuals are urged to coordinate directly with their Alters- und Hinterlassenenversicherung (AHV) compensation fund.
  • Tax payment deferral and for federal suppliers: Companies may extend tax payment periods without paying interest on arrears. This covers deferrals on VAT, customs duties, special consumption taxes and incidental taxes between March 21 and December 31, 2020. Federal tax payments may be deferred without interest between March 1 and December 31.
  • Extension and simplification of “short-time” work: Short-time work is a preexisting subsidy in Switzerland for temporary reductions in the number of hours worked in firms affected by temporary shocks (in this case, COVID-19). This program allows employers who experience temporary drops in demand (or production) to reduce their employees’ hours instead of laying them off. In turn, employees receive a government subsidy proportional to the reduction in hours. 
    • Federal government simplifies application process, allocates CHF 20 billion to finance this program, and extends program duration from three to six months.
    • As of March 2020, the filed applications represented one-third of all Swiss employees. It is estimated that the current unemployment rate of approximately 2.9% might otherwise be as high as 10% without the short-time work program extension.

 

How to Apply for Financial Assistance

Companies can apply here.

Zooming in for a Local Look

Switzerland, a country of 8.6 million inhabitants, is divided into 26 cantons. Each canton has autonomy in developing local COVID-19 relief.  

Below are the initiatives the canton Lucerne has implemented, as described in an interview with Michelle Abboud, North American Vice President of Inbound Investment:  

  • Waiver of interest on late payments for cantonal taxes, following the federal schedule
  • Additional liquidity support of CHF 2 million for “livelihood security for startup companies”
  • Free legal support and one-on-one coaching for companies struggling to benefit from available financial measures

 

Recent Examples

Cyber Security Company Receives Interest Free Loan Within 24 Hours

A cyber security company applied for the COVID-19 credit program and received a 0% interest loan in the amount of its 10% of 2019 revenues. 

The application took 15 minutes and funds were received within 24 hours. 

Manufacturer Receives Retention Incentives

A major industrial company was forced to reduce employee hours to 50%. To retain employees, the company received a federal allowance (no repayment required) for an additional 30% in salary for each employee, resulting in 80% salary protection and ongoing job retention for three to six months, as needed.

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