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Double taxation in Switzerland explained simply – Tax lexicon

In 2018, the federal government collected almost CHF 70 billion in taxes in Switzerland. The cantons collected CHF 48 billion, while the municipalities collected CHF 30 billion. This system leads to a complicated tax distribution and problems with double taxation.

In Switzerland, the tax system depends on the federalist state. Each of the 26 cantons can make its own tax laws. The Federal Constitution states that the cantons are free as long as they respect the Federal Constitution. A major tax reform, known as STAF, was approved by a vote in 2019. It will bring important changes from 2020, such as fairer taxes for all companies and new rules, e.g. the patent box.

Important findings

  • In 2018, fiscal revenue in Switzerland was divided between the federal government, cantons and municipalities.
  • The Federal Constitution gives the cantons the right to enact their own tax laws.
  • The STAF tax reform led to significant changes in the Swiss tax system.
  • The federal structure leads to a complex distribution of tax sovereignty.
  • Special regulations such as the patent box are part of the new tax structure.

What is double taxation?

Double taxation occurs when the same taxpayer is taxed in more than one country. This relates to the same time and the same taxable item. This is often due to differences in tax laws between countries. Many countries are trying to avoid double taxation. This reduces the tax burden for people and companies.

Overlapping taxation

Overlapping taxation occurs when someone pays tax in their home country and in the country where they earn. A Swiss company with revenues from Germany is one example. Thanks to agreements between countries such as Germany and Switzerland, problems such as double taxation in Switzerland are reduced. The withholding tax in Switzerland is 4.5%. It can be deducted from German income tax.

Effective vs. virtual double taxation

There are two types of double taxation: effective and virtual. Effective double taxation means a real additional tax burden. Virtual double taxation is based on different definitions of taxable transactions in different countries. A good example of avoiding double taxation: since July 1, 2023, cross-border commuters in Germany have been allowed to work from home up to 49.9% of the time without losing their status.

Statistics and international agreements

Germany has double taxation agreements with many countries, including Switzerland, the USA and the UK. Switzerland has over 100 such agreements, plus eight special ones for inheritance taxes. Switzerland also wants to achieve the BEPS minimum standards that were set in 2019.

Country Double taxation agreement
Germany Switzerland, USA, Great Britain, France, Netherlands, Austria, Italy, Spain, Japan, Canada
Switzerland Over 100 countries

Swiss fiscal federalism

Switzerland has a special way of levying taxes. The Confederation and the cantons have the main right to levy taxes. The municipalities are also allowed to do this, but they follow the rules of the cantons. This structure leads to diversity and competition between the cantons.

Tax sovereignty of the Confederation and cantons

When Switzerland was founded in 1848, the cantons were given power over taxes. The federal government only received revenue from customs duties. The cantons can decide for themselves which taxes they levy. This leads to different tax burdens between the cantons.

In 2018, the federal government had revenue of CHF 70 billion. The cantons earned CHF 48 billion and the municipalities CHF 30 billion. These figures show how important the cantons are in the Swiss tax system. They play a major role.

Importance of the municipalities

The municipalities in Switzerland are very important. They levy local taxes that have to be approved by the cantons. This enables them to respond to the needs of their residents. They also help to keep Switzerland’s finances stable.

With a new tax reform, the cantons will receive more money from federal taxes. Their share increases from 17% to 21.2%. This gives them the opportunity to reduce their taxes and be more competitive. This reform shows how adaptable the Swiss tax system is.

Level Revenue (2018)
Covenant CHF 70 billion
Cantons CHF 48 billion
Municipalities CHF 30 billion

Tax treaties of Switzerland

Switzerland works together internationally to stop double taxation. It has made many tax agreements. These agreements clarify who and what they apply to and when they are valid.

Scope of the tax treaties

Switzerland’s tax agreements are very precise. They relate to various taxes such as direct taxes and inheritance taxes. For example, there is an agreement with Germany from 1931. It has been renovated several times, most recently in 2011.

Methods for avoiding double taxation

There are methods to avoid double taxation. For example, the exemption method and the imputation method. These methods are explained in the OECD agreement. They help people and companies who work in several countries to avoid paying taxes twice.

Examples of bilateral agreements

Switzerland has agreements with over 100 countries. New agreements have been in place with Brazil, Saudi Arabia and Bahrain since 2021. Switzerland will continue to work with other countries in 2022 and 2023 to resolve tax issues. Here are some important agreements:

Year Country Agreement
1931 Germany Avoidance of double taxation
2021 Brazil New DBA
2022 Luxembourg Adaptation to BEPS standards

The bilateral agreements help Switzerland to connect globally. They prevent people and companies from having to pay taxes twice. This makes taxes simpler and fairer for everyone.

Avoidance of double taxation in Switzerland

Switzerland has concluded many agreements to avoid double taxation. More than 100 countries have such agreements with Switzerland. In addition, there are eight special agreements for inheritance taxes. They help to tax income and assets only once.

International developments have strengthened the Swiss strategy against double taxation. Agreements with countries such as Brazil and Saudi Arabia came into force in 2021. Changes were also implemented with Malta and Japan. These ensure simple control processes and safety.

The BEPS agreement from December 2019 was a big step. It combats tax evasion by multinational companies. Switzerland is now adapting agreements with many countries, such as Argentina and Austria. This should improve standards.

Switzerland is praised internationally for its fair tax policy. Thanks to OECD proposals and new agreements, for example with Lithuania, their commitment is evident. Click here for more information.

Agreement Legally effective since
Brazil, Saudi Arabia, Bahrain Beginning of 2021
Protocols with Malta, Cyprus, Liechtenstein, Japan Beginning of 2021
BEPS Convention December 1, 2019

Legal aspects of double taxation

Double taxation is an important topic in international tax law. The OECD guidelines and Swiss laws help to prevent double taxation. This applies to both individuals and companies.

OECD guidelines and Swiss laws

The OECD guidelines are decisive for international taxes. They prevent conflicts through clear rules on taxation. Switzerland has agreements with over 100 countries to clearly regulate tax issues and promote international business.

From 2021, there will be new agreements with countries such as Brazil, Saudi Arabia and Bahrain. Switzerland has also made changes to existing agreements with countries such as Malta and Japan.

Significance of international tax law

International tax law is becoming increasingly important, especially due to globalization and the digital economy. Switzerland has been supporting the fight against tax avoidance through the BEPS Convention since December 2019.

It is important that Swiss agreements meet the BEPS standards. Countries such as Italy and South Africa are working with Switzerland to achieve this. The changes apply internationally.

State Entry into force DBA BEPS standards
Brazil 2021 Yes
Saudi Arabia 2021 Yes
Bahrain 2021 Yes
Malta Protocol signed Yes
Ethiopia Protocol signed Yes

The continuous improvement of laws is important for Switzerland. This prevents double taxation and promotes a good business climate.

Current challenges and developments

Switzerland faces international challenges in the taxation of the digital economy. The Organization for Economic Cooperation and Development (OECD) develops recommendations for global tax policy.

OECD proposals

One of the OECD ‘s main proposals is a minimum tax rate for global companies. This is intended to reduce profit shifting and tax avoidance. For example, there is a 15% tax rate for large international companies. Such steps help to distribute tax burdens more fairly and identify injustices.

Swiss implementation

Switzerland plans to incorporate the OECD proposals into its tax law. New rules have been in place since the 2019 tax reform. These are intended to improve the distribution of tax revenues. For example, the cantonal share of federal tax rose from 17% to 21.2%.

Fiscal yield 2018 (in CHF billion) Covenant Cantons Municipalities
Revenue 70 48 30

The OECD minimum tax leads to a supplementary tax in Switzerland. 25% of the revenue goes to the federal government, 75% to the cantons and municipalities. This regulation promotes the equal distribution of taxpayers’ money. Adjustments to tax law are necessary due to current developments in double taxation.


Switzerland prevents double taxation through national laws and agreements with other countries. It has agreements with over 100 countries. This shows how important these agreements are for international taxes.

It is interesting to note that Switzerland also has special agreements to avoid double taxation of inheritances. There are eight such agreements, one of which is with Germany. This proves that Switzerland is constantly improving its tax laws and creating fair conditions.

Commuters who work across the border will have to adjust to new tax rules. They must commute between home and work on at least 20% of their working days. It is no longer possible to simply assume 240 working days per year if you work in Switzerland and Germany.

Dividends are also a special case. If someone holds at least 10% of a company, they do not have to pay withholding tax in either country. This shows that Switzerland’s tax system is complicated but effective. More information can be found here.


What is double taxation in Switzerland?

Double taxation occurs when someone has to pay taxes in two countries. This happens because different countries have different rules. Especially in the case of global income and income from another country.

What types of double taxation are there?

A distinction is made between real and virtual double taxation. Real means you pay more tax than necessary. Virtual occurs when the definitions of controllable do not match.

How are tax jurisdictions organized in Switzerland?

The Confederation and the cantons have their own taxing power. The municipalities depend on the cantons. They receive their tax revenue from the canton.

What role do the municipalities play in the Swiss tax system?

The municipalities are very important for Switzerland’s tax system. They help to distribute tax money. The cantons decide which tax rights the municipalities have.

What methods are there to avoid double taxation?

There are two methods to avoid double taxation. The exemption method and the imputation method, based on OECD guidelines.

What tax agreements has Switzerland concluded?

Switzerland has many agreements with other countries. These help to prevent double taxation. They regulate who has to pay taxes and where.

What is the significance of international tax law for Switzerland?

International tax law is becoming increasingly important due to globalization. It strongly influences national laws and agreements.

What are the current challenges in the area of double taxation?

Current challenges include adapting to OECD proposals. For example, minimum taxation and taxes for digital companies.

How is Switzerland implementing the OECD proposals?

Switzerland is adapting its laws and agreements. They want to create fair tax rules for everyone.

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