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Income tax in Switzerland

Did you know that income tax in Switzerland is levied by three authorities? The federal government, cantons and municipalities are all cashing in. This is why taxes vary depending on where you live.

Although it sounds complicated, this puts Switzerland in a good tax position. Taxation here is favorable by international standards.

Income tax applies to the entire income of citizens. It is calculated according to the gross principle. There is a federal tax, a cantonal tax and a municipal tax.

Important findings

  • Income tax is levied three times in Switzerland: by the federal government, the cantons and the communes.
  • Direct federal taxes have a top tax rate of 11.5 % for high incomes.
  • The tax burden can vary greatly depending on the canton and municipality.
  • The total of all income forms the basis for calculating income tax.
  • Individual factors such as income level and living conditions are taken into account.

Basic principles of income tax in Switzerland

In Switzerland, taxes are levied at three levels: Federal, cantonal and communal. This makes the tax system complicated. Types of income include earned income, income from earnings, replacement income and other income.

You can reduce your taxable income. You can use deductions such as those for pensions and insurance. It is important to know the tax rates and deductions in order to file your tax return correctly.

CHF 70 billion went to the federal government in 2018. The cantons received CHF 48 billion and the municipalities CHF 30 billion. Income tax is levied at all three levels. This means that taxpayers can use different tax software.

There are two types of tax liability: unlimited and limited. Persons with unlimited tax liability pay tax on their entire income. Limited taxpayers only pay tax on income from their tax jurisdiction.

The tax system takes into account personal circumstances such as marital status or number of children. There is also tax-free income. These include inheritances and certain winnings from lotteries.

Historical development of income tax

Switzerland’s tax history is exciting and goes back a long way. The canton of Basel-Stadt introduced income tax as early as 1840. Gradually, other cantons followed suit, spreading the tax throughout Switzerland.

Basel’s history plays an important role in understanding today’s tax structure. Direct federal tax was added during the First World War, initially as a war tax. It included a wealth tax and a supplementary income tax, which shaped the tax landscape.

In Switzerland’s tax history, tax rates can be very high, sometimes up to 320%. There is also a progressive direct federal tax. The tax rate is 11.5 % for income over CHF 843,000 for married couples.

Year Significant event
1840 Introduction of income tax in Basel-Stadt
1885 Other cantons follow the example of Basel-Stadt
1918 Introduction of the war tax
1939 Development of a more comprehensive tax structure
1950-1985 Various reforms and adjustments to tax rates

Switzerland’s tax history shows many changes. But Basel-Stadt remains an example of tax innovation. This helps to understand the current tax regulations in Switzerland.

Tax rates and tax competition

In Switzerland, tax rates vary greatly between cantons and municipalities. This leads to intense competition for the lowest taxes. This offers taxpayers many opportunities to save money. It is often wise to seek professional tax advice in Zurich. How to find the best income tax rates.

Cantonal and municipal taxes

In 2023, profit taxes for companies in Switzerland fell slightly. They fell from 14.68% to 14.6%. There were noticeable reductions in Aargau and Basel-Landschaft in particular. But Neuchâtel has increased its taxes.

The canton of Zug has the lowest tax rate at 11.8%. Bern, on the other hand, is far higher at 21.04%. These differences show how important the choice of location in Switzerland is in order to save taxes.

Direct federal tax

Direct federal tax in Switzerland increases with income. The highest tax rate is 11.5%. This tax is in addition to the cantonal and communal taxes.

Zug continues to offer attractive income tax rates of 22.06%. In contrast, taxes in French-speaking cantons such as Geneva are higher, with top tax rates of over 40%. Targeted tax advice in Zurich can be very helpful. This allows you to optimize your tax burden and find the best tax rates.

Taxation according to expenditure

Taxation according to expenditure helps foreign residents in Switzerland who do not work. According to the tax guide, this system estimates taxes based on the cost of living. This is how the tax is calculated.

Advantages of lump-sum taxation

Lump-sum taxation in Switzerland makes paying taxes easier. Especially for foreigners with money in several countries. In 2018, 4557 people paid taxes in this way. They gave a total of 821 million francs.

With this tax, some income from abroad does not pay tax. For example, income from real estate there. This makes lump-sum taxation very attractive for the rich.

Regulations and attempts to abolish them

Some places in Switzerland wanted to abolish this type of tax. Others are keeping them with new, stricter rules. For example, Zurich launched initiatives against flat-rate taxation. The Federal Council tightened the regulations in 2014 and 2016. That should convince more people.

The taxation regulations have changed. For example, the minimum taxable income is now CHF 400,000. Only very rich people now benefit from taxation based on expenditure.

Year Number of taxpayers Total tax payment (in CHF)
2018 4557 821 million

In short, lump-sum taxation in Switzerland has many advantages. But it is constantly being reviewed and adapted. This should keep the tax laws fair and acceptable.

Types of income and tax deductions

In Switzerland, individuals must pay tax on their income. This applies to income from labor, capital and other sources. Taxes are levied by the federal government, cantons and municipalities. The decisive factor is how much you earn after deductions.

There are two types of taxpayers: unlimited and limited. Persons with unlimited tax liability pay tax on their worldwide income. Limited taxpayers only pay tax on income from Switzerland.

Earned income

Earned income is money from work. This includes salaries and money from self-employment. Bonuses and part-time jobs are also included. The total earned income influences how much tax you have to pay.

Certain expenses, such as pensions and insurance, can be deducted from tax. This reduces the tax burden.

Revenue income

Income comes from capital, such as interest and dividends. Rental income is also included. The exact tax rates depend on the canton. This means that everyone has to calculate individually how much tax they have to pay.

You can deduct certain things from your tax bill to pay less. This reduces the amount of income that is taxed.

Replacement income

Replacement income includes, for example, maintenance payments and pensions. They must also be taxed. But there are exceptions, such as scholarships. These are often considered tax-free.

This income, together with the others, forms the basis for income tax. Deductions reduce the tax burden.


How is income tax levied in Switzerland?

In Switzerland, there are three levels at which income tax is levied. The federal, cantonal and municipal levels are important here.

What types of income are taxed in Switzerland?

In Switzerland, income from work, capital gains, substitute income and other types of income are taxed.

How can I submit my tax return in Switzerland?

You can submit your tax return in Switzerland either by post or using special software. Some cantons also have websites for this purpose.

What can I do to save taxes in Switzerland?

To reduce taxes in Switzerland, you can deduct certain expenses. For example, pension contributions or professional expenses.

Which tax software do you recommend in Switzerland?

There are good programs for tax returns in Switzerland, such as EasyTax, TaxMe and PrivateTax.

What are the historical milestones in the development of income tax in Switzerland?

The introduction of the tax in Basel-Stadt in 1840 was a major step forward. The direct federal tax was introduced as a war tax during the First World War.

How do tax rates vary in Switzerland?

Tax rates vary from canton to canton in Switzerland. There is competition for the lowest rates. The highest federal tax rate is 11.5%.

What is flat-rate taxation in Switzerland?

Foreigners who do not work can pay a lump sum in Switzerland. However, this does not apply everywhere.

Which pension expenses can be deducted from tax?

Contributions to retirement and life insurance can reduce taxes in Switzerland.

What is the difference between earned income and income from earnings?

Earned income comes from work. Income consists of interest, dividends and rental income.

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