When moving to Switzerland, it’s important to get to grips with the Swiss tax system and tax rates, which vary considerably depending on which of the country’s 26 cantons you live in.
This guide offers an overview of the tax system in Switzerland, including advice on the following:
- The tax system in Switzerland
- Federal taxes in Switzerland
- Cantonal and municipal taxes in Switzerland
- Taxes on goods and services (VAT) in Switzerland
- Who has to pay tax in Switzerland?
- Swiss tax system for foreigners
- Income tax in Switzerland
- Tax on property and wealth in Switzerland
- Inheritance tax in Switzerland
- Company taxes in Switzerland
- Tax avoidance and evasion in Switzerland
- Tax advice in Switzerland
- Useful resources
ExpatTax is an innovative fiduciary company located in Solothurn, Switzerland. It is committed to providing expats in Switzerland with professional and friendly financial services at affordable rates. These include audit, accounting and business consultancy.
The tax system in Switzerland
The Swiss tax system can be very complicated, especially if you’re new to the country.
The Swiss Federal Constitution governs taxes in Switzerland. Some taxes are set and administered by the federal government, and others are left to the individual cantons. There are four levels of Swiss tax authorities: federal, cantonal, municipal, and the church.
On an international scale, taxes in Switzerland are fairly moderate, though there are considerable differences in tax rates between the various cantons and municipalities.
Federal taxes in Switzerland
The federal government has complete authority over VAT, stamp duty, withholding tax, customs duties, and special consumption tax in Switzerland.
It also sets base levels for other major taxes. For example, when you pay income tax or corporate tax in Switzerland, your final calculation will be made up of the federal rate plus your canton’s rate.
Cantonal and municipal taxes in Switzerland
There are 26 Swiss cantons and around 2,250 municipalities, all of which have certain powers when it comes to taxes.
Swiss cantons have the freedom to set their own income tax, corporate tax, and wealth tax levels. They also levy property taxes, inheritance taxes, and gift taxes. Gift taxes, however, are becoming less and less common.
Municipalities are responsible for local taxes, which can include things like taxes on owning pets and motor vehicles, tickets for events, and local hospitality.
The parishes of the three national churches (Christian Catholic, Protestant, and Roman Catholic) in Switzerland levy a church tax on their members in almost all cantons.
Taxes on goods and services (VAT) in Switzerland
VAT (Mehrwertsteuer or Taxe sur la valeur ajoutée) in Switzerland is charged on goods and services. Companies with revenues of more than CHF 100,000 per year must register for VAT. You can find out if your company is liable for VAT on the Swiss government website.
The standard VAT tax rate in Switzerland is 7.7%. A lower rate of 3.7% is charged for the hotel industry. Food, books, and newspapers are taxed at 2.5%, while medical, educational, and cultural services are exempt from VAT.
Who has to pay tax in Switzerland?
Swiss residents and temporary residents working in Switzerland must pay income tax on their worldwide earnings. 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).
If the authorities do not consider you a Swiss resident, you only pay tax on your Swiss income.
Tax allowances and exemptions in Switzerland
Workers in Switzerland have a series of allowances they can deduct from their tax bills. How much you can claim depends on your status and where you live.
For example, married taxpayers can claim an allowance of CHF 2,600 against their federal income tax, plus CHF 6,500 for each dependent child under the age of 18. Further allowances vary between cantons. For example, residents of Zurich are given an allowance of CHF 9,000 against the cantonal portion of their tax, while Geneva has a higher maximum deduction of CHF 9,980.
When filling out a tax return, you’ll also be able to deduct employment expenses such as commuting costs and costs of meals at your place of work. Further deductions may be available for costs such as alimony, charity contributions, daycare, and medical expenses.
Swiss tax system for foreigners
One of the biggest concerns for expats living and working in abroad is the danger of being liable for taxes in both their new country and their home country.
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 United States, and the United Kingdom.
British, American, and Canadian expats in Switzerland can check out our guides on filing your taxes while living abroad for more information on how to ensure they follow their home country’s tax rules. If you’re a UK national, you can learn about the QROPS scheme for transferring UK pensions when moving abroad.
Automatic exchange of information
Switzerland is one of more than 100 countries that has signed up for the automatic exchange of information (AEOI) system, which aims to prevent cross-border tax evasion.
In 2020, the Swiss government shared details of more than 3.1 million bank accounts with 66 partner countries. In return, it received details of 815,000 accounts held by Swiss citizens in 86 partner countries.
Income tax in Switzerland
Income tax in Switzerland is levied by both the federal government and your canton. This means that your tax calculation in Switzerland is a combination of the rate set by the government and the rate in your local area.
Swiss tax laws consider families to be one unit for tax purposes. If you’re married, you’ll need to fill out a joint tax return and your calculation will be based on the combined income of both you and your partner. If you have a child under the age of 18 who is in employment, this too must be declared in your tax return.
Tax scales vary depending on your relationship status and whether you have children. For example, a single taxpayer must pay 11.5% federal tax when they earn more than CHF 755,200, but married people and single parents won’t pay this tax rate unless they earn more than CHF 895,900.
The easiest way to find out your tax liability is by using the Swiss government’s federal and cantonal online tax calculators.
How to file your income tax return in Switzerland
Swiss citizens, people married to Swiss citizens, and foreigners with permanent residence all need to file an annual tax return. You’ll also need to fill in a tax return if you conduct freelance work, work for a foreign company, or – in some cantons – own real estate in Switzerland.
Individual cantons administer their own tax returns – the Swiss government’s website provides links for each canton.
The tax year in Switzerland corresponds with the calendar year. In most cantons, you need to file your tax return three months later, by 31 March. The majority of cantons allow one free extension. You may be able to pay for a further extension if necessary.
Self-employed income tax in Switzerland
Self-employed workers have to submit a tax return to pay tax on their business income and personal wealth. You can find out more in our guide to setting up a business in Switzerland.
Tax on property and wealth in Switzerland
Property tax (land tax/real estate tax)
Property tax, also known as land tax or real estate tax, is a cantonal tax on land and buildings. This is payable by the registered owners or users of the property in the land register.
Property tax is calculated on the full taxable value of the property. It doesn’t take any related debts or mortgages into account. Properties are taxed at their location, regardless of where the owner lives.
Not all cantons charge a property tax, but it’s commonly levied in tourist resorts and areas with high numbers of second homes. Property tax rates generally range from 0.1% to 0.15% of the property’s taxable value.
Tax on rental value
Property owners must also pay income tax on a property’s perceived rental value. This is the amount you would receive if you rented out the property.
Rental value is generally based on 70% of market rent. You can deduct mortgage interest payments and maintenance costs from your taxable income.
Expats who own property or other assets in Switzerland may also need to pay wealth tax.
Anyone who owns an apartment or house must declare it as an asset in their tax return. Wealth tax is based on your net wealth, but proven debts (such as mortgages) can be offset against it.
Wealth tax varies between cantons, with maximum rates varying from around 0.5% to 0.8%.
Tax on shares
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.
Federal withholding tax is levied at 35% on some forms of income, most notably dividend payments, interest on bank loans and bonds, liquidation proceeds, lottery prizes above CHF 1,000, and payments by life insurances and private pension funds. A rate of 15% applies for pensions, and 8% on other insurance benefits.
Stamp duties are federal taxes levied on some commercial transactions. The name is an anachronism and dates back to the time when such taxes were administered with physical stamps.
Stamp duties include issue tax, which is levied on the issue of securities such as shares and bonds, and transfer tax, which is charged to stockbrokers and holding companies when they trade securities.
Inheritance tax in Switzerland
Expats living in Switzerland can choose whether Swiss inheritance tax law or the laws of their home country should apply in the event of their death.
If someone dies without leaving a will, Swiss laws will apply by default. Swiss inheritance law includes forced heirship rules, which means that some relatives cannot be disinherited even through a last will and testament.
At least 50% of an estate must go to the spouse or registered partner, and at least 75% of the remaining half to the children and grandchildren.
Rates of inheritance tax vary between cantons. Some share inheritance tax responsibilities with municipalities, while some levy taxes for all residents.
Company taxes in Switzerland
Any company with a registered office in Switzerland is liable for Swiss tax, while foreign companies abroad are liable for limited taxation if they hold real estate in Switzerland.
Switzerland is an attractive destination for foreign business owners and investors, thanks to its low tax rates.
The federal Swiss corporate tax rate is a flat rate of 8.5%, but additional cantonal and municipal rates can vary considerably. The maximum corporate tax rate including all federal, cantonal, and communal taxes is between 11.9% and 21.6%. However, a range of allowances and deductions means you’ll usually pay much less.
Tax avoidance and evasion in Switzerland
Switzerland has long been described as a tax haven. A Swiss government amnesty, which allowed citizens to report untaxed assets without fear of legal repercussions brought in CHF 44.2 billion in 2018.
You can learn more about Switzerland’s issues with tax avoidance and evasion in our article on why the world thinks Switzerland is a tax haven.
Tax advice in Switzerland
Considering how complicated the Swiss income tax system can be, and the importance of self-employed expats getting their tax returns right, it’s advisable to seek advice from an accountant.
Not only can a professional save you time and stress, but they can also make sure you’re taking full advantage of the available tax allowances, and can save you from a hefty fine if you get it wrong.