Due to the current interest rate situation, both at the federal level and in the individual cantons, the late payment and compensation interest rates as well as the adjustment interest rates will be increased as of 1 January 2024.
When is each interest rate applicable?
Taxpayers benefit from a possible compensation interest when they pay their taxes before the due date or when the advance payment exceeds the actual tax liability as per the final assessment. During the period between the tax due date and the receipt of the final tax assessment, the adjustment interest may apply to tax credits. Not all cantons have an adjustment interest mechanism. A late payment interest is levied on final tax claims that are not paid within the payment deadline.
Adjustments as of January 1, 2024:
At the federal level, the late payment and compensation interest rates for refunds are now set at 4.75 percent (previously they were 4 percent). For voluntary advance payments of federal direct taxes, the compensation interest rate is increased to 1.25 percent (previously it was 0 percent). These interest rates at the federal level apply, among other things, to VAT, customs fees, federal direct taxes, withholding tax, and stamp duties.
In the canton of Zurich, the government council is raising the compensation interest rate from 0.25 percent to 1 percent. The adjustment interest rate is also increased from 0.25 percent to 1 percent. The late payment interest rate remains unchanged.
The canton of Lucerne has decided to set the adjustment interest rate at 1.25 percent (previously it was 0 percent). The late payment interest rate is also increased; there will now be a default interest rate of 4.75 percent on late payments after the due date of a final tax liability (last year it was 3.5 percent).
The canton of Basel-Stadt has also decided to increase the compensation interest rate: for advance payments in 2024, the new interest rate is 1 percent (previously it was 0.5 percent). The late payment interest rate remains at 3.5 percent.
The canton of Zug, according to a press conference on the 2024 budget, plans to pay an early payment discount and compensation interest rate of 2 percent starting each in the coming year. The decision is expected to be made by the Zug Finance Director in October 2023 and will still need confirmation by the Zug Cantonal Council in November 2023.
It is already known that the cantons of Glarus, Fribourg, Valais, and Neuchâtel will remain at 0 percent for advance payments in 2024. Many other cantons have not yet decided whether and how to adjust interest rates for the coming year.
Conclusion
In conclusion, these changes in interest rates are generally a welcome response to the changing interest rate environment. By increasing interest rates, taxpayers have again a bigger incentive to pay their taxes early. Taxpayers should keep an eye on the new interest rates in their canton of residence or domicile as well as at the federal level in order to plan their tax payments accordingly.
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