Your 2024 tax bill: is tax prepayment worth it?
Tax prepayment or a savings account: which offers more interest? What interest do tax administrations pay? Comparis compares.
02.04.2024
iStock/Delmaine Donson
1. Tax prepayment: what does it mean?
Tax prepayment means that you pay your taxes before they are due. This usually happens in one of two ways:
Recurring payment on account: you regularly pay a fixed amount to the tax office. Payments will be credited to your final invoice.
Provisional tax bill: you pay your provisional tax invoice in full or in instalments. You will usually receive a provisional tax bill in the first half of the year. The invoice for the current year is based on the tax you paid in the previous year.
Prepayment is voluntary in many cantons. However, in some cantons you have to pay the provisional bill. This is the case in Aargau and Thurgau, for example. Most cantons give you interest on prepaid taxes.
2. What interest rates apply to taxes?
There are various types of interest in connection with your tax invoice. Some interest is in favour of taxpayers, while some is at their expense.
Note: the different cantons sometimes give different names to interest rates. In some cantons, remuneration interest and positive compensatory interest are the same. There are also differences between cantonal and federal tax.
Are you paying your taxes late? The federal government and the cantons charge you interest on arrears after expiry of the payment deadline.
The majority of cantons use compensatory interest. It ensures taxpayers are treated equally. For example, if you pay your taxes later, you could leave the money in a savings account until payment is made. Any interest on the savings account would give you an advantage. Compensatory interest mitigates this advantage.
Compensatory interest can be positive (in favour of the taxpayer) or negative (in favour of the tax office). This means if you pay early, you’ll receive a credit note. In the event of late payment, additional costs will be incurred. The compensatory interest is usually declared annually.
The cantons set their deadlines for calculating compensatory interest differently. In some cantons, you will receive positive compensatory interest once payment is received. Negative interest is calculated from the due date. This is usually a date set by the canton. It is independent of the due date of the invoice.
Example compensatory interest
| Provisional tax bill | CHF 10,000 |
|---|---|
| Due date set by canton | 30/09 |
| Compensatory interest | 1% for 12 months |
| Payment of provisional invoice | by 30/09 |
| Your final tax bill | CHF 8,000 |
| Difference | CHF 2,000 |
| Receipt of final invoice | 31/03 (6 months later) |
| Positive compensatory interest rate | Credit CHF 50 (0.5% interest for 6 months) |
There are different definitions of remuneration interest:
You will receive remuneration interest on voluntary payments. You can make these payments before and after receiving the provisional invoice.
You will receive the remuneration interest if:
you pay your provisional invoice and at the same time
the definitive invoice is lower than the provisional. The remuneration interest will be deducted from the difference between the two amounts.
You will be credited with an early payment discount if you pay all taxes at once before a specified date. This also applies if you pay all instalments at once.
Recovery interest is only available in cantons where you are obliged to pay the provisional invoice. You will receive interest on overpaid amounts due to the provisional invoice.
Cantons sometimes charge taxes differently. A detailed description of the types of settlement can be found in the dossier of the Federal Tax Administration.
Note: some tax administrations have a minimum amount for offsetting taxes. These usually apply to amounts in your favour as well as at your expense. Freiburg, for example, does not charge interest amounts below ten francs.
In some cantons, there is also interest on changes or corrections to your final tax invoice.
3. Tax prepayment Switzerland: what interest rates will you get?
Many cantons give you interest on advance tax payments. In some cases, these are higher than those offered by savings accounts with banks.
For direct federal tax, you get:
Remuneration interest: 1.25%
Interest on arrears: 4.75%
4. Interest from savings accounts of some Swiss banks
In most cantons, tax prepayment is optional. You can leave the money set aside for taxes in a savings account until payment, for example. The table shows examples of interest rates on savings accounts. This list is not exhaustive.
| Bank | Interest rate |
|---|---|
| Coop Finance+ | 0.75% Savings conditions of Hypothekarbank Lenzburg |
| Migros Bank | 0.75% up to CHF 100,000 |
| Neon | 0.9% up to CHF 25,000 |
| Postfinance | 0.8% up to CHF 50,000 |
| Raiffeisen | Depending on the region, e. g.
|
| UBS | 0.75% up to CHF 50,000 |
| Valiant | 0.8% up to CHF 50,000 |
| Zürcher Kantonalbank | 0.85% up to CHF 50,000 |
Information correct as at March 2024
5. Should I prepay my taxes or open a savings account?
Is the interest from the tax authorities or a savings account more worthwhile? This depends on the canton and the bank.
In recent years, there have been many adjustments to remuneration interest rates. While interest rates of up to 2% used to exist in the past, some cantons have reached zero in recent years. However, interest rates are set to rise again. Therefore, it’s best to compare interest rates every year.
This article was first published on 11.07.2015
