Find out everything you need to know about income taxes in Switzerland for expats, including how to file, whether you’ll need to pay and what the rates are.
If you’re a foreigner living and working in Switzerland, you should make sure you’re up to speed on the rules of income taxes in Switzerland.
Swiss income tax can be quite complex as it can vary depending on which canton you live in – and it’s just one of the taxes in Switzerland you’ll need to get to grips with.
This helpful guide covers the following topics:
- Income tax in Switzerland
- Earnings subject to income tax in Switzerland
- How to file your tax return in Switzerland
- Income tax rates in Switzerland
- Income tax in Switzerland for foreigners
- Tax refunds in Switzerland
- Tax fines in Switzerland
- Income tax advice in Switzerland
Income tax in Switzerland
The income tax system in Switzerland
The Swiss income tax system is a complex one to understand, as what you pay will depend on where you live in the country.
It follows a federalist structure, where the federal government levies a direct Swiss tax on income, while the individual cantons and 2,250 municipalities levy their own tax on income and capital.
Swiss tax laws are based on the principle that a family’s income and wealth represent an economic unit and are taxed together.
Therefore, only one tax return needs to be submitted for each household; and the income and wealth of both spouses are combined and filed together.
If any children under the age of 18 are earning an income, they must declare it in their parents’ tax return.
Self-employed workers must submit a tax return annually, whereas employees usually pay through PAYE which is sorted out by the employer.
The personal income tax rate in Switzerland will rise to 40% by the end of 2020.
Who pays income tax in Switzerland?
Both Swiss residents and temporary residents that perform ‘gainful activities’ – i.e. earn a salary – in Switzerland are subject to unlimited worldwide tax liability.
Non-residents with specific economic links with Switzerland have a limited tax liability.
In these cases, taxes are not levied on an international basis, but only on specific items of income that have a source in Switzerland.
This includes things like Swiss property and permanent establishments.
Foreign employees with a gross salary of more than CHF 120,000 per year (CHF 500,000 in the Republic and Canton of Geneva) must file a tax return for their worldwide income and assets.
Tax withheld from salary is credited interest-free against the assessed tax.
Who is exempt from income tax in Switzerland?
Tax regulations vary between the different cantons, but anyone living in Switzerland for less than 183 days a year can claim exemption from taxation.
Old-age pensions, occupational pensions, and invalidity insurance benefits must be declared as income, and in most cases, they are fully liable to tax. But any supplementary pension benefits are non-taxable.
Earnings subject to income tax in Switzerland
Taxes on income and salary in Switzerland
There are several types of income that you may have to pay income tax on in Switzerland. These include:
- income from gainful employment: money earned via a salaried job or self-employed work
- compensatory income: includes annuities and pensions
- secondary income: this covers things like seniority allowances and tips
- other income: including prizes on lotteries and pools over CHF 1,000
- income from bank accounts, securities, and real estate property
Taxes on employment benefits
You can deduct healthcare expenses that aren’t covered by health insurance from your taxable income.
Such costs can include things like prescription glasses, treatment by licensed homeopaths, dental care, and health insurance deductibles.
Most cantons and the federal government only deduct the portion of healthcare costs which exceed 5% of your net income, but this can vary.
Taxes on savings and investments
Dividends from shares and ETFs are not tax-deductible. However, gains achieved through buying and selling shares are tax-deductible, as long as you’re not a professional securities dealer.
You can offset any debt you have against your savings.
Taxes on property
Depending on which canton you’re in, there are several types of tax you could have to pay if you own a property.
Property tax, also known as land or real estate tax, in a cantonal tax on land and buildings.
This is payable by the registered owners or users of the property in the land register.
The tax is calculated on the full taxable value of the property – that is, it doesn’t take any related debts or mortgages into account. The property is taxed at its location, regardless of where the owner lives.
Then there’s wealth tax, which states that anyone who owns an apartment or house must declare it as an asset in their tax return.
Wealth tax is also based on the property’s taxable value, but proven debts can be set against it to reduce the taxable value.
Finally, property owners must also pay income tax on a property’s ‘rental value’. This is what you would receive if you rented the property.
You can deduct mortgage interest payments and upkeep costs from your taxable income.
How to file your tax return in Switzerland
People who need to file a tax return in Switzerland include:
- Swiss citizens
- Foreigners with a permanent residence permit C
- Foreigners married to a Swiss citizen
- Employees of foreign employers
- Self-employed workers
That’s because they don’t have their taxes deducted from their salary.
Some cantons have additional criteria in their tax laws that require an ordinary tax assessment of foreign residents in Switzerland (for example, if the resident owns real estate Switzerland).
Income tax deadlines in Switzerland
The tax year in Switzerland corresponds with the calendar year, and therefore the tax year-end is 31 December.
In most cantons, you need to file your tax return three months later, on 31 March.
The majority of cantons allow one free deadline extension, and you may be able to pay for a further deadline extension.
Income tax forms in Switzerland
Cantonal tax administrations deal with tax returns.
The Swiss authorities website can provide links for each canton; simply enter the one you live in to access a computer program and website where you can complete your tax return.
Married couples must complete a joint tax return, which both spouses must sign.
Before you start filling out the relevant forms, make sure you have all of the necessary documents to hand. These include things like:
- salary statements
- bank statements
- private pension statements (third pillar)
- statements of special payments into an occupational pension fund (second pillar)
- medical expenses
- professional expenses
- donation receipts
If you’re a homeowner, you’ll also need documents showing property tax, mortgage interest, maintenance and renovation bills, running, and administrative costs.
Income tax rates in Switzerland
Your tax bill will vary depending on which canton and municipality you live in.
In general, tax scales are progressive – so, the more you earn, the more tax you’ll pay.
There is a reduced tax scale for married couples that live together and single-parent families.
So, while a single taxpayer will have to pay 11.5% direct federal tax once they earn more than CHF 755,200, married taxpayers and single taxpayers with children won’t pay that level of tax until they earn more than CHF 895,900.
The Swiss authorities have federal and cantonal online tax calculators, so you can work out how much you’ll need to pay.
Personal tax allowances and deductions in Switzerland
The tax allowances you receive depend on your personal circumstances – whether you’re married, how many children you have, and whether you have any other special needs to take into account.
Eligible deductions can vary between cantons, but in general you can make deductions for:
- Work-related expenses: such as travel costs and stationery;
- General deductions: state and work pensions contributions, invalidity insurance, medical insurance, life insurance, childcare, charitable donations, interest paid on private debt;
- Social deductions: for instance, if you’re responsible for someone in need of care
Self-employed income tax allowances in Switzerland
Self-employed workers have to submit a tax return to pay tax on their business income and personal wealth.
Private companies and sole proprietors must declare their results as income. If you run a limited company, however, self-employed workers keep their employee status.
Income tax in Switzerland for foreigners
Expats intending to settle permanently in Switzerland are taxed on their worldwide income, which takes in income from foreign pensions, property and offshore employment.
You’ll be considered a Swiss resident for tax purposes if you remain in the country for more than 90 days (or 30 days if you’re working) – even if you are not engaged in gainful activity.
If the authorities do not consider you a Swiss resident, you’ll only pay tax on your Swiss income.
In order to help expats avoid double taxation, Switzerland has double tax treaties with more than 80 countries. These include Australia, Iceland, Hong Kong, the USA and the UK.
Tax refunds in Switzerland
As a foreign employee, if you have tax deducted from your salary, and aren’t required to file a tax return, you may be able to submit a claim for the correction of withholding tax. This may lead to a partial tax refund.
Correction claims can be submitted in most cantons. They’ll usually provide a special form to detail your claim, but some require a full tax return.
You can apply for a correction claim for:
- Debt interest on consumer loans and credit cards;
- Cost of international weekly residence;
- Education and retraining costs;
- Health and accident costs;
- Disability costs;
- Support payments;
- Alimony payments;
- Childcare costs;
- Pension fund contributions (second pillar), and own pension contributions (third pillar).
Correction claims must be submitted before 31 March of the following year – most cantons will not extend this deadline.
Extra tax refunds for expats
Expats can get some additional tax deductions, according to the Expatriate Ordinance by the Federal Department of Finances.
However, fairly few people are eligible. You must either be a member of senior staff on secondment, or a specialist with particular professional qualifications from a foreign employer.
Specialists or executives with a time-limited local contract only qualify as expats in this instance if their employment is a local transfer within the group, and the foreign employer must guarantee a re-employment after their stay in Switzerland.
Deductions you can get including costs for housing, moving, traveling and school fees.
This special treatment will end if the temporary assignment is changed to a timely unlimited contract, or after 5 years of staying in Switzerland – whichever is soonest.
Some cantons may grant a lump sum expat deduction – known as OEXPA deduction – which can be equivalent to around CHF 1,500 per month.
Tax fines in Switzerland
Getting your Swiss tax return wrong can be an expensive business.
Failing to file your tax return on time may mean being subject to default taxation.
The authorities will calculate your tax bill based on a ‘reasonable estimate’ of what they think you’ll owe – except the tax base is likely to be substantially higher than what you’d pay if you submitted your return on time.
It’s possible to appeal, but you must do so within 20 or 30 days of the issue of the final assessment (depending on the canton).
What’s more, there are also penalties for non-filing.
If you don’t think you can file your tax return online, request an extension from your canton.
Income tax advice in Switzerland
Considering how complicated the Swiss income tax system can be, and the importance of self-employed expats getting their tax return right, getting the help of an accountant is advisable.
Not only can a professional save you time and stress, but they can also make sure you’re taking full advantage of all available tax allowances, and can save you a hefty fine if you get it wrong.
If you’re looking for an accountant in Switzerland, the International Federation of Accountants can be a good place to start.
American expats in Switzerland can get advice on meeting their US tax obligations from Taxes For Expats.