In 2018, the distribution of fiscal revenue in Switzerland was as follows: The federal government received CHF 70 billion, the cantons CHF 48 billion and the municipalities CHF 30 billion. These figures show the federalist structure of the Swiss tax system. The system is based on the sovereignty of the cantons and special taxes for the Confederation.
The introduction of the STAF corporate tax reform was an important step. On May 19, 2019, 66.4% voted in favor and it came into force on January 1, 2020. It ensures that all companies are taxed fairly. This promotes competitiveness and secures jobs in Switzerland. The abolition of tax privileges for certain companies was important for international recognition.
The Swiss tax system offers special advantages, such as the “patent box”. There are also additional deductions for research and development costs. A minimum tax rate of 18.03% and rules on self-financing make the location attractive. Companies must pay tax on at least 30% of their income. This helps to maintain Switzerland’s attractiveness as a business location.
Important findings
- Switzerland’s federalist tax system promotes the sovereignty of the cantons.
- The STAF corporate tax reform contributes to the competitiveness and attractiveness of Switzerland as a business location.
- The distribution of the fiscal yield shows the importance of the various levels of government.
- New tax regulations support research and development.
- The abolition of tax privileges was necessary for international acceptance.
What is the tax rate?
In Switzerland, the tax rate determines how much tax someone has to pay. It changes depending on the canton and municipality. It is usually given as a percentage, for example 119%.
Basis of the tax rate
The level of taxes depends on the tax rate. Suppose someone earns CHF 70,000 in a canton. And the tax rate is 5.18%. He then pays a state tax of CHF 3.626. Multiplied by the municipal tax rate of 119%, this results in CHF 4,314.95 for municipal tax.
There are tax rates for both private and corporate income and assets. In cantons such as Fribourg, the municipal tax is calculated by multiplying the municipal tax rate by the state tax.
Differences between cantonal and municipal taxes
Tax rates vary greatly across Switzerland. In Basel-Stadt, for example, there is no separate municipal tax. This is already included in the cantonal tax. In other cantons, tax rates for natural persons and legal entities may differ within a municipality. There are also major differences between the municipalities in a canton.
It often happens that tax rates for private income and assets are the same. This is also the case with company profits. This shows the diversity of tax regulations in the municipalities. The exact tax burden is not easy to calculate. It is therefore important to understand the tax system.
| Canton | Tax rate Basic rate | Simply tax | Municipal tax rate | Municipal tax |
|---|---|---|---|---|
| Example canton | 5.18% | CHF 3,626 | 119% | CHF 4,314.95 |
| Fribourg | 4.50% | CHF 3,150 | 120% | CHF 3,780.00 |
| Ticino | 6.00% | CHF 4,200 | 117% | CHF 4,914.00 |
How does the tax rate affect the tax burden?
In Switzerland, taxes are money that we have to pay without getting anything directly in return. They help to finance the country and can influence our behavior. The tax rate plays an important role in the calculation of these taxes.
“The tax rate largely determines the tax burden on the individual. It is made up of federal, cantonal and municipal taxes.”
The cantonal tax rate is used to determine the state tax. It can be expressed as a percentage or as a multiple. Let’s assume that someone has an income of CHF 70,000. With a tax rate of 5.18% and a tax rate of 110%, he pays CHF 3988.60 in state tax.
Another example is council tax. Take the cantonal tax rate of 5.18% and multiply it by 1.19. This results in the municipal tax: CHF 4314.95. In Basel-Stadt, however, the municipal tax is already included in the cantonal tax.
The cantons handle the tax rate differently. Some use a factor, such as 1.19, others a percentage, e.g. 119%. This leads to very different tax burdens from canton to canton.
The tax burden for companies often does not show how progressive or high the taxes are. Many cantons deviate from the usual tax system with municipal taxes. In some places, natural and legal persons pay differently. This makes taxes even more diverse.
| Canton | Tax rate | Tax rate | Municipal tax |
|---|---|---|---|
| Fribourg | 5.18% | 1.19 | By multiplying the tax rate by the state tax rate |
| Basel-Stadt | 5.18% | Integration | Integrated in the cantonal tax |
| Ticino | 5.18% | 1.19 | By multiplying the tax rate by the state tax rate |
The tax burden in Switzerland varies greatly depending on where you live. With the tax calculator from the Federal Tax Administration (FTA), anyone can calculate their taxes accurately.
Tax rate in Switzerland
In Switzerland, the tax rate varies from canton to canton. It reflects what each region needs financially and decides politically. Taxes for people and companies can be very different.
Comparison of tax rates between the cantons
The tax rate may vary depending on the canton. In the cantons of Fribourg and Ticino, municipal tax is calculated by multiplication. The canton of Vaud has its own basic tariff for municipalities. An overview of these differences is useful.
| Canton | Municipal tax rate |
|---|---|
| Basel-Stadt | Integrated |
| Vaud | Own basic tariff |
| Fribourg | Multiplication |
| Ticino | Multiplication |
There are also often differences in the calculation of taxes for companies. This shows how complex the Swiss tax system is.
Examples of tax rates in various municipalities
For example, municipality X has a tax rate of 119% or 1.19. This can result in large differences in the local tax burden.
There is no separate municipal tax in Basel-Stadt. This is already included in the cantonal tax. Other municipalities may have different tax rates. This makes the system more complex. Almost half of the cantons calculate profit and capital tax differently. It is therefore important to compare the tax rates.
Many examples show how municipalities and cantons set their taxes. It is important to know the tax rates, especially when relocating or starting a business.
The Swiss tax system and its special features
The Swiss tax system is based on a federalist approach. Cantons and municipalities play an important role. You can adapt the taxes to local requirements. This structure creates a direct link between citizens and authorities.
Federalism and fiscal sovereignty
In Switzerland, tax sovereignty is divided between the federal government, cantons and municipalities. In 2018, it looked like this:
- Confederation: CHF 70 billion
- Cantons: CHF 48 billion
- Municipalities: CHF 30 billion
This underlines the importance of the cantons and municipalities in the Swiss tax system. They are free to set their own tax rates. This creates a diverse tax landscape.
Reform of the tax system
The STAF tax reform started on January 1, 2020. It aimed to improve the harmonization of tax law. 66.4% voted in favor in the referendum on May 19, 2019. The reform led to major changes:
- Abolition of tax privileges: Certain special tax regulations were abolished.
- Patent Box: Income from inventions is now taxed at a lower rate.
- Promotion of R&D: More deductions for research and development.
- Self-financing allowance: A minimum tax rate of 18.03% was introduced.
The cantons’ share of direct federal tax rose to 21.2%. This gives the cantons financial leeway. These changes keep Switzerland attractive for taxes in Switzerland.
“International developments are challenging Switzerland.” – OECD
Switzerland is planning a supplementary tax to comply with the OECD minimum rate of 15%. 25% of the revenue goes to the federal government, 75% to the cantons and municipalities. This strengthens the financial stability of the Swiss tax system.
Conclusion
Taxation in Switzerland has a federalist structure. It varies greatly between the cantons. The top personal tax rates range from 22.2% in Zug to 45% in Geneva.
There are also major differences in wealth tax. They range between 0.12% and 0.63%, depending on the assets and canton. Zug has the lowest corporate tax rate at 11.80%. Zurich has the highest rate at 19.65%.
VAT in Switzerland has a standard rate of 7.7%. There is a reduced rate of 2.5% and a special rate for the hotel industry of 3.7%. This contributes to the country’s financial stability.
Finally, Switzerland has secured its attractiveness through its tax diversity and adjustments. The country remains an economically strong and attractive location. The Swiss tax system is interesting for both individuals and companies.