What is AHV/IV/EO (Swiss Social Insurance)?
AHV (Alters- und Hinterlassenenversicherung), IV (Invalidenversicherung), and EO (Erwerbsersatzordnung) are the three main Swiss federal social insurances. Together, they provide old-age/survivors pensions, disability insurance, and income replacement during military service or maternity leave. The combined contribution rate for employed persons is 10.6% employer + 10.6% employee = 21.2% of gross salary. Self-employed persons pay the full amount themselves at a slightly lower combined rate.
Current Rate (2025)
Employed: 10.6% employer + 10.6% employee (total 21.2%). Self-employed: tiered from 5.371% on first CHF 56,900 of profit up to 10.0% on higher income. No upper salary cap for AHV contributions.
Example
A GmbH pays its owner-director a salary of CHF 150,000. The company contributes CHF 15,900 employer AHV/IV/EO and deducts CHF 15,900 from the director's salary — a total CHF 31,800 in AHV/IV/EO contributions on this salary alone.
How AHV/IV/EO (Swiss Social Insurance) works in Switzerland
The AHV/IV/EO system is the backbone of Swiss social security and forms the first pillar (Säule 1) of Switzerland's three-pillar pension system.\n\n**The three pillars**\n- Pillar 1 (AHV/IV/EO): mandatory state pension, funded by contributions from all working residents\n- Pillar 2 (BVG/Pensionskasse): mandatory occupational pension for employees earning above CHF 22,050. Employers must provide a Pensionskasse and contribute at least 50% of premiums.\n- Pillar 3 (private savings): voluntary, tax-advantaged savings (3a and 3b). Annual 3a contribution limit: CHF 7,056 for employed persons, CHF 35,280 for self-employed without Pensionskasse.\n\n**AHV contribution details**\nAHV contributions have no upper salary cap — unlike many European countries. A director earning CHF 1,000,000 pays AHV on the full amount. Contributions are calculated on gross salary including bonus, but excluding expense reimbursements at actual cost.\n\n**IV contributions**\nIV (disability) is built into the same contribution rate — 0.7% each for employee and employer, included within the quoted 10.6% rate.\n\n**EO contributions**\nEO (income replacement) is 0.25% each for employee and employer, also included within the 10.6% rate.\n\n**Owner-directors (Gesellschafter-Geschäftsführer)**\nFor owner-directors of a GmbH or AG who are subject to AHV: if they receive both salary and dividends, AHV is calculated only on salary (wage income), not on dividend income. This is a key feature of the salary-dividend planning approach. The AHV authority (SVA / AHV-Ausgleichskasse) may scrutinise very low salaries to ensure they are not being artificially depressed to shift income to dividend (which is AHV-free).\n\n**ALV (unemployment insurance)**\nIn addition to AHV/IV/EO, employers and employees each contribute 1.1% for ALV (unemployment insurance / Arbeitslosenversicherung) on the first CHF 148,200 of salary. Above CHF 148,200, an additional 0.5% solidarity contribution applies with no corresponding benefit. Owner-directors holding more than 50% of a company are generally excluded from ALV.\n\n**Family allowances (FAK)**\nEmployers pay family allowances (Familienzulagen) at rates set by each canton, typically 0.5–3.5% of payroll. These fund the cantonal family allowance payments to employees with children.
Related terms
Quellensteuer is Switzerland's withholding tax on employment income paid to foreign nationals who do not hold a C permit (permanent residence) or are not Swiss citizens. It is withheld by the employer from salary at source, at cantonal-specific rates, replacing the normal self-assessment income tax obligation for the affected employee.
A GmbH (Société à responsabilité limitée / Società a responsabilità limitata) is Switzerland's most common private limited company form. It requires a minimum share capital of CHF 20,000, all of which must be paid up on formation. Liability is limited to the company's assets. It is governed by the Swiss Code of Obligations (OR/CO), Articles 772–827.
Gewinnausschüttung is the formal distribution of retained profits from a Swiss company to its shareholders, typically as a dividend (Dividende). Under Swiss company law, profit distributions from an AG or GmbH require a shareholder resolution at the annual general meeting, based on audited annual accounts. They trigger Verrechnungssteuer at 35% and personal income tax for the recipient shareholders.
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