Bonus Payments and Variable Compensation: Tax Treatment in Switzerland

In many industries, bonuses, commissions, and other variable compensations are a central part of salary. Especially in finance, consulting, or multinational companies, bonuses can make up a significant portion of annual income. But how are these additional payments treated for tax purposes in Switzerland?

This article explains the types of variable compensation, how they are taxed, and what employees should consider to avoid surprises.

What Counts as Variable Compensation?

Bonus Payments

A bonus is an additional payment, either performance-based or a general recognition. Examples include:

• Year-end bonus
• Target achievement bonus
• Profit sharing

Commissions

Common in sales or consulting roles, commissions usually depend directly on revenue generated.

Employee Participation

• Stock options
• Restricted Stock Units (RSUs)
• Employee shares

These are more complex as they are often not paid in cash immediately but are subject to conditions (e.g., vesting periods).

Tax Treatment of Bonus Payments

Income from Employment

Bonuses are considered income from employment, like regular salary. They are fully taxable under the same rules as standard wages.

Timing of Taxation

The bonus is taxed in the year it is received. For example, a bonus paid in January 2025 for performance in 2024 is taxed as 2025 income.

Withholding Tax

Foreign employees without a Swiss C-permit may have taxes withheld directly by the employer as quellensteuer (withholding tax).

Tax Treatment of Stock Options and RSUs

Differentiation by Type

• Non-listed options: Taxed at exercise
• Listed options / RSUs: Taxed at delivery or transfer

Taxable Amount

The taxable value is usually the market value of shares or options at the time of exercise or transfer.

Capital Gains

Value increases after allocation are generally tax-free capital gains, unless the activity is considered commercial.

Social Security Considerations

AHV/IV/EO

Bonuses and employee participation are subject to social security contributions; both employer and employee pay their shares.

Unemployment Insurance (ALV)

Contributions to unemployment insurance apply to bonus payments if within insured salary limits.

Special Situations

Work in Multiple Countries

If bonuses or stock options are earned while working in multiple countries, income must be allocated proportionally. Double taxation agreements (DTAs) are crucial in this context.

Spouses and Families

Bonuses are included in the household’s total income since married couples and registered partners are jointly taxed in Switzerland.

Practical Examples

Example 1: Bonus Payment

An employee in Zurich receives a CHF 20,000 bonus in March 2025. It is taxed together with 2025 salary and subject to social security contributions.

Example 2: Stock Options

An employee receives stock options in 2022, exercised in 2024. The gain at exercise is taxed as income. Any value increase afterwards is tax-free.

Common Mistakes and Tips

Common Mistakes

• Assuming bonuses are tax-free or preferentially treated
• Not declaring employee shares or RSUs
• Failing to allocate income for international work

Tips

• Always declare bonus payments in the tax return
• Keep documentation for employee participation (allocation, exercise, market value)
• Check DTAs for international work
• Seek tax advice for complex compensation structures

Conclusion

Bonuses and variable compensation are common in Swiss salary packages but are taxed like regular income. While bonuses are relatively straightforward, stock options and RSUs require careful documentation and knowledge of tax rules.

By maintaining complete records and considering international aspects, employees can avoid tax risks and ensure correct taxation.