How does AHV social insurance work for Swiss company owners?

The AHV (Alters- und Hinterlassenenversicherung) system is the foundation of Swiss retirement provision and applies to virtually everyone working in Switzerland, whether employed or self-employed. The rules for company owners are nuanced.

Employed owner-directors (GmbH/AG) An owner-director who is paid a salary by their GmbH or AG is treated as an employed person for AHV purposes. The company is the employer and is responsible for: - Registering with the cantonal Ausgleichskasse (compensation office) - Deducting the employee share (10.6%) from each salary payment - Adding the employer share (10.6%) on top - Remitting the combined 21.2% monthly to the Ausgleichskasse

The AHV contribution base is the gross AHV-subject salary — which includes regular salary, bonuses, and certain benefits in kind, but excludes reimbursements at actual cost.

There is NO upper salary cap for AHV contributions. This distinguishes Switzerland from many European countries. A director paid CHF 1,000,000 in salary pays AHV on the full CHF 1,000,000. This is a significant cost for high earners and is one of the main reasons for the Swiss salary/dividend planning strategy.

AHV on dividends — the key rule Dividends paid from a GmbH or AG to its shareholders are NOT subject to AHV. This is fundamental to Swiss tax planning. When a shareholder receives CHF 100,000 of dividend, zero AHV is owed by either the company or the shareholder. This creates the AHV saving from the dividend strategy.

The Ausgleichskasse scrutiny rule Because dividends are AHV-free, the Ausgleichskasse watches for owner-directors who set artificially low salaries to shift income into the AHV-free dividend. If the salary is found to be unreasonably low for the role and responsibilities, the Ausgleichskasse can reclassify the excess dividend as AHV-subject salary and demand backdated contributions plus interest.

The standard applied is the salary a comparable employee in the same role at an arm's-length company would receive. Working directors of actively trading businesses should pay themselves a market-comparable salary.

Self-employed individuals Sole traders (Einzelunternehmen) and partners in Swiss partnerships are self-employed for AHV purposes and pay directly to their Ausgleichskasse: - On first CHF 56,900 of profit: tiered rates starting at 5.371%, rising to 10.0% on income above this level - There is no employer share — self-employed pay the whole contribution themselves but at a slightly lower combined rate than the total 21.2% employed rate - Self-employed AHV contributions are deductible from taxable income for personal income tax purposes

ALV (unemployment insurance) On top of AHV, employees pay ALV at 1.1% employer + 1.1% employee on salary up to CHF 148,200. A solidarity surcharge of 0.5% applies (no benefit) on salary above CHF 148,200. Owner-directors who hold more than 50% of their company's shares are generally NOT eligible for ALV benefits and may apply to the Ausgleichskasse for exemption from ALV contributions.

BVG — Pensionskasse (Pillar 2) Employees earning more than CHF 22,050 per year must be enrolled in a Pensionskasse (occupational pension). The employer must pay at least 50% of the combined contribution. Pensionskasse contributions are mandatory and separate from AHV — they go to the Pensionskasse, not the Ausgleichskasse. Self-employed persons can voluntarily join a Pensionskasse or substitute with higher Pillar 3a contributions.