In this guide, we explain the various Swiss tax deductions to help lower your tax burden as an expat living in Switzerland.
One of the most dreaded words of the English vocabulary – taxation – has led many to pull out their hair and weep. Now, we offer you some useful tips on how to approach your taxes in Switzerland wisely.
Be it the VAT on your car, on smaller purchases like clothes, or even your household garbage, you are in control of your spending. Discover how to keep a close eye on your Swiss taxes, and reclaim as much money as possible in your tax return.
Switzerland: An attractive location for taxation
The tax burden in Switzerland is the lowest in Europe with a VAT of 7.7%. Swiss income taxes are also very favourable compared to other European cities. Expatriates working in Switzerland get allowances for certain standard deductions.
For example, in Geneva, expatriates may receive a tax free allowance of up to 10% of base salary to cover housing and relocation costs. Specific deductions on the schooling of minors are also possible. Financial planning expert Key Investment can provide advice on the possibilities of these tax deductions.
In Switzerland, all types of income are pooled and taxed together, such as income from husband and wife. The federal government levies a direct Swiss tax on income, while the cantons levy taxes on income and capital.
Tax regulations vary between the different cantons. For those residing in Switzerland for less than 183 days a year, exemption from taxation can be claimed. Additionally, where limited work permits of 90–120 days are granted, taxation is limited.
Filing US taxes from Switzerland
Despite the fact that every US citizen and Green Card holder is required to file a tax return with the IRS even when living abroad, many expatriates still fail to do so.
Many are unaware of these obligations, thinking that as an expat they do not need to pay or file tax returns in the US. You do! For more information and help filing your US tax returns from Switzerland, contact Taxes for Expats and see our Guide to taxes for American expats.
Swiss tax deductions on transportation
The locals in Switzerland often have one car for the cold, winter months, and another for summer. Unlike other European countries, in Switzerland you get one license plate for two cars, at a cost of CHF 135, provided that you use one car at a time.
This way, you pay road tax only once, on the car with the highest engine capacity. Also, when possible, purchase your automobile in your country of residence, and later import it to Switzerland. This way, you only pay the difference in the tax rates in your country of residence and Switzerland.
As for travelling via public transportation, opt for the halbtax karte (half-fare card). For only CHF 185 a year, the halbtax karte saves you 50% on your train travel costs.
Tax deductions in Switzerland for personal expenses
While most Swiss tax refunds relate to income, relocation and transportation, thinking with a tax-free mindset will help you reclaim amounts on other items as well. Take shopping as an example. Most EU countries specify a minimum amount to be spent in one shop. For instance, one needs to spend at least €137 in the Netherlands.
You would need to show the relevant documentation to customs officials for a stamp when leaving your country of residence to claim this tax refund. Next, within eight days of your arrival in Switzerland, you need to go to the city hall with your purchased items, receipt and travel ticket. While this may seem like a cumbersome procedure, it will save on your accumulated yearly Swiss taxes.
Swiss tax deductions on business expenses
Resident companies are subject to corporate income tax, as well as the cantonal net worth taxes. The corporate income tax rate is 8.5%. In Switzerland, all corporate taxes are deductible. Cantonal tax rates vary. Business tax refunds differ from individual refunds because they include services as well as goods, and do not require customs validation. Read more in our guide to Swiss corporate tax rates.
Swiss tax deductions on garbage
As there is no general garbage tax in Switzerland, garbage bags are taxed instead. In order to save on these taxes, the trick is to stuff cheaper bags in your main garbage bag, and just get rid of those every time you dispose of your garbage. This way, your overall garbage tax will be lower, and it is an unnecessary cost you can redeem.
While there is no way to completely avoid taxation, even in Switzerland, simple measures in your day-to-day life will lower your tax burden significantly.