What are the three levels of taxation in Switzerland?

The direct federal tax (DFI), managed by the Federal Finance Administration (AFC/ESTV); the cantonal tax, managed by the Canton; the municipal tax, managed by the municipality. Each canton and municipality applies its own rates and multipliers, so the overall tax burden varies significantly between regions. The cantonal multiplier applies to the DFI, and the municipal multiplier applies to the cantonal tax.

How much does the employee and employer pay for the AVS/AI/IPG?

The employee pays 5.3% of the gross salary, the employer 10.6%. Unemployment (AD/AC) adds 1.1% up to a set annual ceiling. Accident insurance (LAINF/LAA) represents between 0.7% and 1.5% of salary, depending on the sector of activity. The employer always pays the share of social contributions.

Is health insurance (LAMal) a tax?

No. LAMal is a mandatory insurance policy for every resident entering Switzerland, to be taken out within 3 months, but it is not a tax or a salary contribution. It is subscribed at a private health insurance fund. Premiums vary by canton, age group and selected deductible (CHF 300–2500 for adults). The Canton may offer reductions (subsidies) based on the beneficiary's income.

What is the LPP rate for a 50-year-old employee?

For 45–54 year olds, the second pillar rate (LPP) is 15% of the coordinated salary. Above 55 years up to the reference age, it rises to 18%. These percentages are paid by the employer and increase with age because the fund has to accumulate in shorter times than a younger worker.

How much annual leave must an employee have?

A minimum of 4 weeks per year for most workers. If the employee is under 20, the minimum is 5 weeks per year. The maximum working time is 45 hours per week (industry, offices, sales) or 50 hours in other sectors. In addition, a maternity employee is entitled to 14 weeks at 80% of pay, and the father to 2 weeks of leave.

Opening a business in St. Gallen: taxes and procedures (cross-border guide)

Di Marco Ferrari · Published on 4 September 2026

Swiss administrative office with professional desks and business registration and tax documents

From the trade register to social contributions: a complete guide to costs and tax obligations for those who start a business in the Canton of St. Gallen.

Context

In brief

Three levels of taxation: federal (IFD), cantonal, and municipal, with varying multipliers for each canton and municipality
Employee contributions on salary: AVS/AI/IPG 5.3%, AD/AC 1.1%, LAINF/LAA 0.7–1.5% depending on the sector; employer's version is double or triple
Mandatory pension fund LPP: 7–18% of the coordinated salary depending on age (25–34 years: 7%, 55+ up to reference age: 18%)
LAMal mandatory within 3 months; premiums vary by canton; deductibles for adults CHF 300–2500

Key facts

What: Three levels of taxation (federal, cantonal, municipal); the Federal Tax Administration (FTA/ESTV) manages IFD and VAT; cantonal administrations manage cantonal and municipal taxes
Where: Canton of St. Gallen; variability for each canton and municipality with their own multipliers
Who: Employer and employees; UFAS/BSV manages social security (AVS/AI/LPP), not taxes
Employee contributions: AVS/AI/IPG 5.3% (employer 10.6%), AD/AC 1.1% up to the maximum, LAINF/LAA 0.7–1.5%, LPP 7–18% depending on age bracket
Health insurance: LAMal mandatory for residents within 3 months; deductibles CHF 300–2500; premiums by canton with possible cantonal subsidies

Starting a business in the Canton of St. Gallen means navigating a tax system structured in three levels — federal, cantonal, and municipal — and complying with numerous obligations towards employees. Those who decide to start a business cannot limit themselves to the commercial register: they must understand how taxes work, which contributions to pay, and which insurances are mandatory.

…

Operational details

The actual cost of a new business is not limited to tax payments. There are at least four components: federal, cantonal, and municipal direct taxes, social contributions for employees, mandatory insurance, and supplementary pension provision. Taxes and contributions: the first pillar Anyone opening a business in Italian Switzerland or in any canton must pay AVS/AI/IPG to their employees. The contribution is calculated as a percentage of the gross salary: the employee pays 5.3%, the employer 10.6%. Unemployment (AD/AC) adds 1.1%, with a predefined annual maximum. For accidents (LAINF/LAA), the employer pays between 0.7% and 1.5% depending on the sector: a craftsman pays more than an employee. The second pillar (LPP, professional pension provision) is mandatory for coordinated salaries (excluding the amount that exceeds the ceiling, currently unspecified). The contribution rate varies by age group: 25–34 years: 7% 35–44 years: 10% 45–54 years: 15% 55 years until the reference age: 18% These amounts increase with age because the pension must accumulate in a shorter time. A small business that hires a 50-year-old employee faces greater contribution pressure than one that hires a 28-year-old. Additionally, the employee is entitled to a minimum of four weeks of annual leave (five if under 20 years), a maximum of 45 hours of weekly work (industry, offices, sales) or 50 hours in other sectors. If she is a woman on maternity leave, she is entitled to 14 weeks at 80% of her salary; if he is a father, two weeks of leave. LAMal and supplementary insurance Health insurance (LAMal) is mandatory for every resident who has been in Switzerland for three months from arrival. It is not a tax, but a private insurance policy taken out with the health insurance funds. Premiums vary by canton, age, and chosen deductible. In the canton of St. Gallen, as in every canton, insured persons can benefit from reductions (cantonal subsidies) based on income — a tool that the Canton itself finances. The deductibles available for adults vary: CHF 300, 500, 1000, 1500, 2000, 2500. A lower deductible means higher monthly premiums, but greater protection against unexpected expenses. A business that hires its first employee must ensure that this expense is considered in the operating budget. Consult the health insurance comparison tool to check the cantonal reductions available and choose the most convenient policy.

Key points

Opening a business in St. Gallen requires a series of administrative and financial steps. Here is an operational checklist based on what Switzerland requires. ### Step 1: Registration and Documentation Before hiring your first employee, register your business with the St. Gallen cantonal commercial register. This registration is the legal prerequisite for operating. Subsequently, apply for VAT identification with the AFC/ESTV if your business exceeds the annual turnover threshold (contact the cantonal office for the exact threshold). Open a bank account in the company's name to track every transaction. ### Step 2: Obligations towards Employees When hiring your first employee, you are obligated to: - Pay AVS/AI/IPG contributions (5.3% employee, 10.6% employer) - Register them with the unemployment fund (AD/AC 1.1% up to the annual maximum) - Register workplace accidents with SUVA (0.7–1.5% employer depending on the sector) - Register them with the mandatory LPP fund (7–18% employer depending on age) You will also have contractual obligations: provide a written employment contract, respect the maximum working hours (45 hours per week for industry/offices/sales, 50 for other sectors), guarantee at least 4 weeks of annual leave (5 if under 20 years), and pay maternity contributions (14 weeks at 80% for the employee) and paternity contributions (2 weeks, if applicable). ### Step 3: Mandatory Insurance Within 3 months of starting the business (if you have employees, immediately): - Take out a LAMal policy with a cantonal health insurance fund (mandatory for residents). Premiums vary; consult the cantonal comparator for available reductions. - Check if your business requires other mandatory insurance — this depends on the sector and specific cantonal laws. ### Step 4: Tax Declaration and Payment Within the deadlines set by the Canton of St. Gallen (typically by March 31 of the year following the tax period), submit the integrated income tax return: - Federal direct tax (FDT) — calculated by the AFC/ESTV - Cantonal tax — calculated by the Canton of St. Gallen - Municipal tax — calculated by your municipality of residence The rates vary: the canton applies its own multiplier; the municipality adds an additional multiplier. The overall tax burden depends on the combination of these factors. Use the salary calculator to estimate the monthly contribution burden for an employee, or consult the tax calculator for federal and cantonal tax predictions in your specific case.

Frequently Asked Questions

What are the three levels of taxation in Switzerland?: The direct federal tax (DFI), managed by the Federal Finance Administration (AFC/ESTV); the cantonal tax, managed by the Canton; the municipal tax, managed by the municipality. Each canton and municipality applies its own rates and multipliers, so the overall tax burden varies significantly between regions. The cantonal multiplier applies to the DFI, and the municipal multiplier applies to the cantonal tax.
How much does the employee and employer pay for the AVS/AI/IPG?: The employee pays 5.3% of the gross salary, the employer 10.6%. Unemployment (AD/AC) adds 1.1% up to a set annual ceiling. Accident insurance (LAINF/LAA) represents between 0.7% and 1.5% of salary, depending on the sector of activity. The employer always pays the share of social contributions.
Is health insurance (LAMal) a tax?: No. LAMal is a mandatory insurance policy for every resident entering Switzerland, to be taken out within 3 months, but it is not a tax or a salary contribution. It is subscribed at a private health insurance fund. Premiums vary by canton, age group and selected deductible (CHF 300–2500 for adults). The Canton may offer reductions (subsidies) based on the beneficiary's income.
What is the LPP rate for a 50-year-old employee?: For 45–54 year olds, the second pillar rate (LPP) is 15% of the coordinated salary. Above 55 years up to the reference age, it rises to 18%. These percentages are paid by the employer and increase with age because the fund has to accumulate in shorter times than a younger worker.
How much annual leave must an employee have?: A minimum of 4 weeks per year for most workers. If the employee is under 20, the minimum is 5 weeks per year. The maximum working time is 45 hours per week (industry, offices, sales) or 50 hours in other sectors. In addition, a maternity employee is entitled to 14 weeks at 80% of pay, and the father to 2 weeks of leave.