Glossary: Swiss Tax and Salary Terms

The Swiss tax and social security system uses many technical terms and abbreviations. This glossary explains the most important concepts related to payslips, taxes and social insurance in Switzerland – organised alphabetically.

AHV / OASI (Old-Age and Survivors' Insurance)

The AHV (known as OASI in English) is the first pillar of the Swiss pension system and forms the mandatory state old-age and survivors' insurance. It covers basic living costs in retirement or in the event of death. The contribution rate is 8.7 per cent of gross salary, shared equally between employer and employee.

ALV / UI (Unemployment Insurance)

The ALV (unemployment insurance) provides financial protection in case of job loss and funds measures for rapid reintegration into the labour market. The contribution rate is 2.2 per cent of insured earnings up to a maximum of CHF 148 200 per year. Employer and employee each pay half of the contribution.

BVG / LPP (Occupational Pension / Second Pillar)

The BVG (also known as LPP in French) governs occupational pension provision, the second pillar of the Swiss pension system. Pension fund contributions are mandatory for employees whose annual income exceeds the entry threshold. Contribution rates depend on age and range from 7 per cent (ages 25-34) to 18 per cent (ages 55-65).

Cantonal Tax

Cantonal tax is the income tax levied by the canton of residence. Tax rates vary considerably from canton to canton, which can lead to significant differences in net salary. In addition, municipalities levy a communal tax calculated as a multiple of the cantonal tax. Comparing cantons is essential for understanding your overall tax burden.

Church Tax

Church tax is levied by the recognised national churches (Roman Catholic, Evangelical Reformed, Christian Catholic) and is mandatory for church members in most cantons. It is calculated as a percentage of the cantonal tax. Leaving the church allows you to avoid this tax, though the process varies by canton.

Coordination Deduction

The coordination deduction determines which portion of salary is subject to BVG second-pillar contributions. It currently amounts to CHF 26 460 and is subtracted from gross salary to arrive at the coordinated (insured) salary. The term "coordination" refers to the alignment between the first and second pillars of pension provision.

Cross-Border Commuter (Grenzgaenger)

Cross-border commuters are individuals who live in a neighbouring country and travel daily or weekly to work in Switzerland. Special tax rules apply to cross-border commuters, as defined in double taxation agreements. Depending on the country of residence, taxation may occur in the home country or in Switzerland.

Direct Federal Tax

The direct federal tax is the income tax levied by the Swiss Confederation. It is progressive, ranging from 0.77 per cent to 11.5 per cent. Unlike cantonal taxes, the federal tax rates are uniform across all of Switzerland and may be adjusted annually to account for inflation.

EO / APG (Loss of Earnings Compensation)

The EO (loss of earnings compensation scheme) compensates employed individuals for income lost during military service, civil service or civil protection duties, as well as during maternity and paternity leave. The contribution rate is 0.5 per cent of gross salary, shared equally between employer and employee.

Gross Salary

Gross salary is the total remuneration before deduction of social insurance contributions and taxes. It includes the base salary as well as any allowances, bonuses and other compensation. The gross salary serves as the calculation basis for all social security deductions and withholding tax.

IV / DI (Disability Insurance)

The IV (disability insurance) is a mandatory social insurance that provides benefits in the event of disability. It belongs to the first pillar and funds rehabilitation measures as well as disability pensions. The contribution rate is 1.4 per cent of gross salary, shared equally between employer and employee.

Median Salary

The median salary is the wage at which exactly half of all employees earn more and the other half earn less. It is determined by the Federal Statistical Office (FSO) in the Swiss Earnings Structure Survey and serves as an important benchmark for salary comparisons. The median salary in Switzerland is approximately CHF 6 788 gross per month.

NBUV / AANP (Non-Occupational Accident Insurance)

The NBUV covers accidents that occur outside of working hours, including during leisure activities, sports or at home. The premiums are borne entirely by the employee and amount to between 1 and 3 per cent of insured salary depending on industry and insurer. Employees working fewer than 8 hours per week are exempt from NBUV coverage.

Net Salary

Net salary is the amount actually credited to the employee's bank account after deduction of all social insurance contributions and any withholding tax. It is calculated by subtracting AHV/IV/EO, ALV, BVG, NBUV contributions and, where applicable, withholding tax from the gross salary.

Salary Certificate (Lohnausweis)

The salary certificate is an official document issued annually by the employer, detailing all salary components and deductions. It serves as the basis for the tax return and must comply with the guidelines of the Swiss Tax Conference. In addition to gross salary, it includes information on expenses, company cars and other fringe benefits.

Social Deductions

Social deductions refer to the total mandatory social insurance contributions deducted from gross salary. These include AHV/IV/EO, ALV, BVG and NBUV. For an average employee, social deductions amount to approximately 12 to 15 per cent of gross salary, depending on age and salary level.

Tax Multiplier (Steuerfuss)

The tax multiplier is a coefficient used to convert the basic cantonal tax into the municipal tax. Each municipality sets its own tax multiplier, which is why tax burdens can vary significantly within the same canton. A tax multiplier of 100 per cent means the municipal tax equals the basic cantonal tax rate.

Third Pillar (Pillar 3a / 3b)

The third pillar encompasses private, voluntary pension provision. Pillar 3a (tied provision) offers tax advantages, as contributions can be deducted from taxable income. The annual maximum is CHF 7 258 for employees with a pension fund. Pillar 3b represents unrestricted savings without tax benefits on contributions.

UVG / LAA (Accident Insurance Act)

The UVG governs mandatory accident insurance for employees in Switzerland. It distinguishes between occupational accident insurance (BUV/AAP), whose premiums are paid by the employer, and non-occupational accident insurance (NBUV/AANP), whose premiums are paid by the employee. The maximum insured annual salary is CHF 148 200.

Withholding Tax (Quellensteuer)

Withholding tax is deducted directly from salary and applies to foreign employees without a permanent residence permit (C permit). It combines federal, cantonal and municipal taxes into a single deduction. Rates vary by canton, marital status and religious affiliation. For gross salaries exceeding CHF 120 000 per year, a subsequent ordinary tax assessment is carried out.