Taxes: a detailed overview of individuals and legal entities

Taxes in Switzerland

Among all European countries, it is Switzerland that has the most favorable tax regime. Let’s try to figure out what taxes are set in Switzerland and how much you will have to pay them if you decide to move here to live or even open a business.

Tax Rates in Switzerland

To get acquainted with the tax system of this country stands with its characteristic feature – multi-level. Depending on the scale of taxes are

3 types:

  • Federal (paid by all residents without exception and have the same size for all regions of the country);
  • Cantonal (paid by residents of specific cantons, their size is set “on the ground”);
  • Municipal (transferred to the budget of a particular settlement, and is calculated by multiplying the cantonal tax by the “local” coefficient).

Below are the 2017 federal tax rates in Switzerland. (table 1)

Income tax 8.5%
Income tax on individuals from 1% to 11.5%
VAT 7.6%
Property tax from 1% to 3%
Withholding tax (non-resident dividends) 35%
Capital tax from 0.02% to 0.5%

Income tax of 11.5%

Income tax in Switzerland is paid on the basis of residence. Tax payments are distributed among the state, Canton, and community (approximately one third for each level). There are significant differences between tax rates in cantons and even in communities. The tax on income depends on your place of residence but rarely rises above 30%.

It is better to check current rates in cantons and municipalities in local fiscal authorities or their sites if you want to get 100% reliable information.

Taxes for legal entities

Income tax in Switzerland is paid by all companies that have registered on its territory. In addition, the tax is paid on the profits of permanent missions, branches and real estate of non-resident companies geographically located within Switzerland.

It is important that capital gains are not paid as a separate tax, but are taken into account when income tax is calculated.

Its base for calculation includes net income from running a business and passive income. It does not include the income of the foreign real estate resident and its foreign branches (they are subject to taxation of the country in which they are located), but the income from the business is taken into account not only “Swiss”, but worldwide.

The federal rate on the net profit of companies is 8.5%, but when a deduction on capital is applied, the rate may decrease to 7.8. If we take into account the cantonal rates and municipal coefficients, then on average the combined tax rate on profits in Switzerland varies from 12% to 22%.

Taxes for individuals

All residents are required to pay income tax in Switzerland.

It is very profitable and convenient for a taxpayer, that not all annual salary (or income) is taken as a tax base, but its balance after numerous deductions for social and pension benefits, unemployment contributions, and also expenses for:

  • travel to work;
  • nutrition;
  • clothes;
  • medical insurance;
  • language courses, etc.

Also, if you take a mortgage, then the interest on it will be deducted from the estimated income tax base.

For your information, the lowest rates are in Wallerau (Canton Schwyz), and the highest is in Geneva and Basel.

But on this taxes in Switzerland for individuals do not end. In some cases also payable (table 2)

Income tax in Switzerland

It is paid by every temporary or permanent resident of Switzerland. The tax base is the global tax physical person.

The table below will help you figure out the incomes from which income tax is paid in Switzerland, and from which not.

Counted Not counted
Salary Interest not exceeding the limit on savings deposits
Income from business or professional activity Inheritance and Donation Gains
Income from investments Property Insurance Payments
Social Security Payments Subsidies
_____________________________________ Additional pension payments, insurance payments for life and health

This tax has a progressive rate, which is affected not only by income but also:

  • the number of dependents of the taxpayer;
  • the presence or absence of preferential deductions.

The maximum rate is 11.5%.

Tax return

The tax period is equal to the calendar year, but the boundary dates for the delivery of the declaration vary by cantons. At the end of the year, one declaration is filled in for all paid fiscal payments. Residents of the world’s most prosperous country are not held criminally liable for delay, but a fine has been imposed for such a violation. However, if the violation was committed for the first time – you can get rid of the warning.

Such a flexible fiscal policy is based on the fact that the taxpayer violates the order not specifically, but because of its forgetfulness. That is, there exists a kind of presumption of innocence of the taxpayer.

The declaration itself is a rather lengthy document, and not all of them get it right the first time. If you have difficulties in filling out – you can call the contact phone number, which is listed directly on the declaration, where they will tell you for free how to fill it in exactly – what information should be entered in which columns. Also, many companies and individuals offer filling out declarations and Tax optimization on a paid basis – their services can also be used. They will help to figure out what taxes in Switzerland will not pay, as well as how to get benefits.

Switzerland taxes are not particularly high. Despite the complex federal political structure, the Swiss tax system is fairly simple and financial management is quite effective.

Property tax. The cantons impose a low property tax, a maximum of 1%, on the net value of your property (except when paying a lump-sum tax). This oldest Swiss tax has never risen so dramatically in contrast to other countries. Wealth is not punished.

Lump tax. In Switzerland, it is possible to pay a fixed tax once a year. It is calculated from the size of the rent for your house (or the cost of rent), while it does not depend on your income or condition. The lump-sum tax is based on Swiss federal legislation and is possible throughout the country.

For example, you rent an apartment for 3000 francs per month. The annual rent is 3000 * 12 = 36,000 francs. Your income tax will be 36.000 * 5 = 180.000 francs. Under the lump-sum tax scheme, 30% of the amount of income tax is collected, that is, 180,000 * 30% = 54,000 francs.

To be able to pay a lump-sum tax, you must reside in Switzerland, having a residence permit of category B or C, you can manage your investments, but you cannot work in Switzerland and abroad.

When calculating any type of tax in Switzerland, you need to take into account the many nuances, especially if you have several sources of income or if you want to use a system of avoiding double taxation.

Inheritance tax. In many cantons of Switzerland, income derived from a resident and taxpayer in Switzerland is not taxable. In cantons that recognize inheritance tax, the tax rate is very low compared to other countries, for example, in the canton of Vaduz, it is 3.5%.

Capital gains tax in Switzerland does not apply, except for those whose profession includes the purchase and sale of certain material assets (eg stocks) and real estate.

The Swiss tax system is recognized all over the world, the banking system also enjoys world renown, many are eager to open an account in a Swiss bank, which gives a guarantee of the safety of your capital.

Switzerland is a very rich country with unchanged legislation and a fairly flexible tax system. If you want to open a business in Switzerland, buy real estate or get a residence permit for investment, the company Eurogroup Consult is at your service. We will select the most optimal and profitable option for you, and our tax advisors will advise you on taxes in Switzerland.