Interest Rates for Provisional Swiss Tax Payments Compared

In Switzerland, the federal government and cantonal government pay interest on provisional taxes, and on tax bills paid before a certain deadline. This guide answers the most important questions about interest for early tax payments, and gives you an overview of interest rates.

How are taxes levied in Switzerland?

In Switzerland, taxes for individuals are levied using the “postnumerando” system. In this system, taxes are charged every year based on the actual income earned in that year.

While the exact way in which you are billed varies somewhat between cantons, it always follows this pattern:

1. You receive a provisional tax bill with an estimate based on your financial situation in the previous tax year. In some cantons, you do not receive fixed provisional bills, but can request deposit slips with which you can make provisional payments based on your own calculations.
2. The next year, you fill out and submit your tax declaration. You can find a detailed explanation in the guide to completing a Swiss tax declaration.
3. Your tax declaration is audited by the tax office, accounting for changes in your income and wealth, as well as any tax deductions you claim.
4. The tax office issues a final tax bill. If the final tax bill is higher than the amount you paid in with the provisional tax bill, then you will be billed for the difference and must pay within 30 days (90 days in certain cantons). If your final tax bill is lower than the provisional tax bill, you will be reimbursed for the surplus amount paid.

There are cantons in which paying the provisional tax bills is voluntary. In this case, you are only required to pay the final bill, but have the option of paying the provisional bill if you want to.

When do I earn interest on tax payments?

Many cantons pay you interest on provisional tax payments. You earn this interest on provisional tax payments you make up to a certain deadline. The interest is calculated from the time the provisional payments are made until the time that your tax audit is completed and the final tax bill is issued. The exact period for which you receive interest varies between cantons. The interest you earn is paid out to you along with the portion of your provisional tax payment that exceeds your final tax bill.

The way that interest is calculated and the names used to describe the interest varies between cantons. But the purpose, in every case, is to create fairness between those who pay their tax bills earlier and those who pay their tax bills later, and to encourage taxpayers to pay their taxes early.

Some cantons only pay interest on the portion of your provisional tax payments that is actually used to cover your final tax bill. But there are also cantons that pay interest on the excess portion of provisional payments that ends up being returned to you.

How much interest can I earn?

The interest rate used for the direct federal tax is determined by the federal government, and is identical across all of Switzerland. 

How much interest you earn on provisional cantonal and municipal taxes depends primarily on which canton or cantons you pay taxes in. Each canton sets its own interest rates. Municipalities use the interest rates of the canton they are located in.

The amount of interest you can earn on provisional tax payments depends on how much taxes you have to pay, and on the interest rate of the canton you live in. The more taxes you pay and the higher the interest rate paid by your canton, the more interest you can earn.

Example: You live in a canton that pays one percent interest per annum on provisional tax payments. You make a provisional tax payment of 6000 francs one year before your final tax bill is issued. Your final tax bill is just under 6000 francs. In this case, you earn 60 francs.

More on this topic:
Important Swiss tax deductions explained
A guide to Swiss tax declarations
Taxes for foreign residents in Switzerland explained
Taxes for car owners in Switzerland explained
Swiss taxes for property owners explained