If you move to Switzerland as an employee or to start a business, you will be subject to the Swiss tax system unless you have tax residency elsewhere. Switzerland has signed numerous bilateral agreements with other countries to prevent double taxation. Understanding your tax status and learning about Swiss taxation if it affects you is essential. This article explores Switzerland's tax systems and the procedures for filing tax returns.
The Swiss tax system
Federal, cantonal and municipal taxes
Taxes in Switzerland are collected at three levels: by the Confederation, the cantons, and the communes.
The Confederation handles direct federal tax and value-added tax (VAT).
Direct federal tax is an income tax assessed and collected by the individual cantons on behalf of the Confederation.
The cantons and municipalities are responsible for collecting personal income and wealth taxes.
Typically, tax collection is divided so municipalities apply a coefficient to the cantonal tax rates to determine their own taxes.
Good to know:
In Switzerland, each canton has its own tax laws. If you're moving to a different canton, make sure to check the specific tax regulations that will apply to you. You can find links to the cantonal tax authorities here.
The main taxes in Switzerland
Income tax
Like in most countries, the amount of tax you pay depends on your income.
Your taxable income is calculated by subtracting deductions, such as social security contributions and transportation costs, from your gross income.
In Switzerland, you are required to declare your taxes annually for the previous year.
Good to know:
Swiss citizens and foreigners with a C permit pay taxes by filing an annual declaration. However, foreign workers living in Switzerland without a C permit have taxes deducted at source.
In this situation, your employer will withhold taxes from your salary each month. This withholding covers federal, cantonal, and municipal income taxes.
Wealth tax
Along with income tax, Switzerland also retains wealth tax.
You need to declare assets such as real estate, various securities, cash, account balances, life or annuity insurance policies (including their surrender value), valuable art collections, and other similar items.
From this amount, you can deduct certain items, such as debts (e.g., mortgages and small loans).
The specific deductions allowed can vary by canton, so it's best to contact the cantonal tax authorities for detailed information.
Property taxes
If you buy or sell real estate in Switzerland, you have to pay taxes in the place where your property is located.
Are you buying a house or apartment in Switzerland?
You must pay transfer taxes, which apply in every canton. These fees cover administrative costs, such as registering the new owner in the land register.
Transfer taxes vary by canton, ranging from 1% to 3% of the property's purchase price.
Are you selling your house or apartment in Switzerland?
If you make a capital gain from selling your property, it will be taxed.
The capital gains tax rate depends on how long you have owned the property. To discourage property speculation, gains realized over a short period are taxed at a higher rate.
Do you own a house or apartment in Switzerland?
If you live in your own home in Switzerland, you must declare its imputed rental value. This is approximately 60–70% of the rent you would earn from a similar property.
You need to report this value on your tax return, but you can deduct certain expenses from your taxable income, such as mortgage interest and maintenance costs.
Property taxes are also charged in over half of Switzerland's cantons. Owners or co-owners must pay a tax of about 2 to 3 per thousand of the property's estimated value.
For a second home in Switzerland, both the imputed rental value and property tax are due in the canton where the property is located.
Second homes abroad must be declared both in the foreign country and in Switzerland. In Switzerland, this information will be considered when determining the tax rate for your income and assets.
Gift and inheritance tax
Donations: Donations are taxed in most Swiss cantons. This includes gifts of money, valuable items (especially art), insurance benefits, and similar assets. The tax amount typically depends on the value of the donation and the relationship between the donor and the recipient. Generally, the closer the relationship, the lower the tax rate.
Inheritance tax: Inheritance tax is paid by those who inherit assets. Similar to gift tax, the amount depends on the value of the inheritance and the heir's relationship to the deceased. Heirs who are not related to the deceased will generally pay higher taxes.
Other taxes in Switzerland
Value-added tax (VAT)
Value-added tax (VAT) in Switzerland is charged at a rate of 8.1% on most products and services.
However, a reduced rate of 3.8% applies to accommodation and hotel services, and a lower rate of 2.6% applies to food, medicines, newspapers, and books.
The health, education, culture, and property rental sectors are exempt from VAT.
For businesses, only those with annual sales exceeding CHF 100,000 are required to pay VAT.
Withholding tax
This tax applies to investment returns, such as interest and dividends, with 35% paid to the Swiss Federal Tax Administration.
You can request a refund of the withholding tax after reporting your capital returns on the relevant section of your tax return.
Dog tax
You need to register your pet in a national database that tracks all dogs in Switzerland. If you move or your dog passes away, you must also notify your local council.
The annual fee varies based on your pet's weight and your commune, ranging from CHF 100 to 200.
Exemption from compulsory military service
Swiss men must pay a tax if they do not complete their required days of military or civilian service.
Since compulsory service in Switzerland lasts about ten years, the exemption tax can be charged for up to 11 years.
Corporate tax in Switzerland
Companies in Switzerland are subject to corporate income tax.
Each canton and municipality sets its own tax rates on corporate profits, which can vary significantly from one region to another. Some companies choose their headquarters' location based on the tax benefits offered by different cantons.
In addition to cantonal and municipal taxes, there is a federal corporate income tax, which is consistent across the country at 8.5%.
Swiss tax rates
As noted earlier, Switzerland's tax method and amount vary by canton.
We recommend using a tax simulator, such as the one provided by the Federal Tax Administration (FTA).
For more information, check the websites of the various cantonal tax authorities.
Taxes for foreigners and cross-border commuters working in Switzerland
Foreigners working in Switzerland
In general, activities conducted in Switzerland are taxed there unless there is a tax treaty with your home country states otherwise.
Determining tax residence can be complex and depends on factors like the time spent in each country, the location of your main professional activity, and where your economic interests are based. If you're unsure about your situation, a tax advisor can help clarify these issues.
Foreign nationals with a B or L work permit who are subject to taxes in Switzerland have their taxes deducted at source. Those with a C permit must file a tax return like Swiss nationals, reporting for the previous year using a tax return form.
Cross-border workers
The conditions and location for tax payments for cross-border workers depend on both their country of residence and the canton where they work. Factors such as your salary level and whether you return to your home country daily can also affect your tax situation.
For example, if you work in Basel or the canton of Vaud but return daily to your home country, you will pay taxes in your home country. However, if you return home only once a week, you will pay tax in Switzerland.
Each cross-border worker's situation should be assessed individually. Contact your cantonal tax office to understand how to comply with Swiss tax regulations in your specific case.
Swiss tax declaration procedure
For income and wealth tax purposes, the following documents are generally required:
- Pay slips or bookkeeping for self-employed workers;
- Bank statements;
- Statements of investment securities; pension certificates, if applicable.
If you have deductions to apply to your return, you must provide supporting documents such as:
- Attestations of contributions;
- Proof of medical, professional, or continuing education expenses, if applicable;
- Documents relating to property taxes, debts, invoices for maintenance, repairs, administration, operating costs, etc.
How do you declare your income in Switzerland?
You will receive a tax return form from your cantonal tax office that you need to complete and return.
In all cantons, you can file your tax return electronically.
You typically have 30 days to submit your tax return, with the deadline specified on the forms. If you encounter any issues, contact the tax authorities in your canton for assistance.
Good to know:
Married couples living or working in Switzerland must complete and sign a joint tax return.
Useful links:
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