Last update: 17.09.2024 08:34
We pay taxes either all at once or in fixed tax installments. Paying taxes in advance means voluntarily paying the taxes you expect to pay in advance. This can be worthwhile. Why?
Firstly, you will have to pay your taxes at some point anyway and secondly, many cantons pay you a comparatively high interest rate if you pay in advance. So paying taxes in advance can make sense for you, depending on the interest rate. First, let’s take a look at the four relevant interest rates on which your decision depends.
Bank interest, compensation interest, compensatory interest, default interest, prepayment interest
If you understand what interest you get and what you pay and how much it is, you will quickly understand whether paying tax in advance is worthwhile for you. You can also find the breakdown in table form below.
- Bank interest is the interest you receive on your money in a salary account or savings account. Despite the rise in interest rates, this is still around 0% for the vast majority of banks on a private account.
- Compensatory interest (also known as compensatory interest) is the interest you receive from the tax authorities if it later transpires that they have overcharged you for taxes. Compensatory interest is tax-free.
- Default interest is the interest you pay to the tax authorities if you do not pay taxes on time. Taxes are due when the invoice is sent. If you do not pay taxes owed despite a reminder, you will be prosecuted. You can deduct the default interest from your tax return as a deduction for interest payments.
- Prepayment interest is the interest that the tax administration pays you on voluntary payments before the installment invoice is due. It works like this: if you have a credit balance in your prepayment account with the tax administration, the installment invoices are covered by this. Interest is paid on your credit balance until this credit is credited. If your prepayment balance exceeds the installment invoices, interest will be paid on any surplus until the end of the year at the latest. The prepayment interest is taxable.
| Interest type | Interest on what? | Who pays whom? | Taxable? |
|---|---|---|---|
| Bank interest | your account balance | Bank you | Yes |
| Compensation interest | for overcharged taxes | Tax office you | no |
| Default interest | for taxes not paid on time | you to tax office | no, but deductible |
| Prepayment interest | on tax payments before the due date | Tax office you | Yes |
Prepayment interest 2023 / 2024 in various cantons
Incidentally, federal tax is due on 31.03. of the following year. of the following year, which applies throughout Switzerland. In the case of cantonal and municipal taxes, each canton sets its own payment dates, deadlines and interest rates. In the reference procedure for direct taxes, the Association of Swiss Tax Authorities has compiled, among other things, how federal and cantonal taxes are levied, invoiced or reimbursed.
Paying taxes in advance therefore works very differently in the various cantons. This reflects the federal system. The prepayment interest rate differs quite significantly and changes annually.
What interest on advance payments is there? What interest on arrears do I have to pay?
For some populous cantons, you will find the 2023 / 2024 prepayment interest rate and default interest rate in the table below. With the turnaround in interest rates, some cantons have fortunately increased their interest rates for advance payments again.
This also applies to the federal government. From 2024, the federal government will once again pay interest on advance payments (2.0%) and increase interest on arrears (4.75%). This ends the lean period at federal level that has applied to advance payments since 2017. At federal level, the interest on arrears and remuneration was increased from 3% to 4% from 2022.
| Canton | Prepayment interest in % | Default interest in % | ||||
|---|---|---|---|---|---|---|
| 2022 | 2023 | 2024 | 2022 | 2023 | 2024 | |
| Aargau | 0.10 | 0.30 | n.a. | 5.1 | 5.0 | n.a. |
| Basel-Stadt | 0.10 | 0.50 | 1.0 | 3.0 | 3.5 | 3.50 |
| Basel-Land | 0.20 | 0.20 | 0.80 | 5.0 | 5.0 | 4.75 |
| Berne | 0.00 | 0.25 | n.a. | 3.0 | 3.0 | n.a. |
| Fribourg | 0.00 | 0.00 | n.a. | 3.0 | 3.0 | n.a. |
| Grisons | 0.00 | 0.00 | n.a. | 4.0 | 4.0 | n.a. |
| Lucerne | 0.00 | 0.00 | n.a. | 3.5 | 3.5 | n.a. |
| St. Gallen | 0.25 | 0.25 | 0.25 | 4.0 | 4.0 | 4.0 |
| Solothurn | 0.00 | 0.00 | 0.00 | 3.0 | 3.0 | 3.5 |
| Wallis | 0.00 | 0.00 | 0.00 | 3.5 | 3.5 | 3.5 |
| Train | 0.00 | 0.00 | 2.00 | 4.0 | 4.0 | 4.0 |
| Zurich | 0.25 | 0.25 | 1.00 | 4.5 | 4.5 | 4.5 |
| Covenant | 0.00 | 0.00 | 1.25 | 4.0 | 4.0 | 4.75 |
When is the tax payment due?
The tax administration determines the amount and deadline for the taxes to be paid. The cantonal systems for tax payments, the number and dates of installment invoices and refund regulations differ.
For example, Valais levies five provisional installments, the canton of Bern three (May 20, August 20, November 20). Ticino also levies three installments, but on different dates (May 1, July 1 and September 1). In Zurich, there is a general due date of September 30. There is also a due date in Aargau, but the reference date there is October 31.
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Tips on paying taxes in advance
Canton or not – there are still some general tips for your tax money.
Tip 1: Pay taxes on time
As you always pay higher interest on late payments than you get from the bank, it’s not worth putting off tax installments that are due. Pay on time to optimize your finances.
Tip 2: Pay taxes in advance if there is prepayment interest
Most banks do not pay interest on private accounts and still pay a measly minimum interest rate on savings accounts. If you receive a prepayment interest rate from the tax authorities that is higher than the bank interest rate, it makes sense to pay your taxes in advance. Although the prepayment interest rate is low in most cantons, the small optimization is worthwhile. This way you get a little more out of your money.
Tip 3: Plan cantonal and federal tax separately
From the tax administration’s point of view, advance payments for the federal government and the canton go to different accounts. You should therefore plan the expected tax separately for the Confederation and the canton. If you pay too much to the federal government and too little to the canton (or vice versa), this can lead to interest on arrears or zero interest due to overpayment. It therefore makes no sense to pay more tax in advance than you expect to pay in total.
Tip 4: Withholding taxpayers should not pay too little
For taxpayers subject to withholding tax, the withholding tax deducted should ideally cover the tax owed. If too much withholding tax was deducted, you will receive a refund with the refund interest. If too little was deducted, you will receive an additional charge with the higher default interest rate. So make sure you don’t pay too little, otherwise it will be expensive.
In addition to paying taxes in advance, there are other ways you can optimize your finances by making early payments. Do you know the effect of switching your pillar 3a payments from the end of the year to the beginning of the year?
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