The Swiss tax system: simple, not complicated

I couldn't help but wonder: how complicated is the Swiss tax system really...? Many people feel the same way, who live, earn an income, run a business or simply buy something in Switzerland. The Swiss tax system can be as daunting as a new romance on a first date: maybe not as chic and attractive, but twice as mysterious.

Getting to know each other for the first time is crucial – both on a date and when it comes to taxes. So let's take a closer look at the Swiss tax system together.

The date: in the Swiss tax system, your dating partner is given

Without a doubt, the most important decision in dating is which partner you get involved with. When it comes to taxes, the choice is made for you. The date is set: depending on whether you file your tax return as an individual or a legal entity.

Taxes for individuals

As a natural person - i.e. a private individual - you pay tax on your income. This can be income from employment or self-employment, but also, for example, income from rent, dividends, interest or replacement income. The cantons and municipalities also tax assets such as cash, bank balances, shares and real estate.

Depending on your individual situation, there are other applicable taxes, such as inheritance or gift tax, property gains tax, dog tax or withholding tax. And then there are taxes that apply directly to the purchase of certain goods. From general value added tax to mineral oil tax on fuel and tobacco tax. Today, however, we will focus on the taxes that are important for your tax return.

Taxes for expats - without a permanent residence permit

Foreign nationals living in Switzerland who have a permanent residence permit (also known as a C permit) pay taxes in the same way as Swiss nationals and complete a tax return. However, if you are a foreigner working in Switzerland without a C permit, you will have to pay withholding tax. It is standardised across the entire canton and is deducted directly from your salary by your employer.

Taxes for companies and legal entities

Companies and legal entities also have to pay taxes in Switzerland. Depending on the situation, profit tax, capital tax, VAT or withholding taxes on dividends are due.

The tax adapts to your life

The taxes you have to pay in Switzerland depend on the reality of your life: as a private individual, an expat or an entrepreneur, different taxes apply. Just like your dating partner, your taxes must fit your life. At least with taxes, you don't have to choose.

YBut you can still make one decision when it comes to taxes: Choosing a partner who will assist you with all tax matters.  We will be happy to support you in making your date with the Swiss tax system more pleasant.

The location: important for the Swiss tax system and for dating

On a first date, the romantic atmosphere is more important than the cost. The location is also crucial when it comes to tax. But here, it's all about the money: in addition to the federal government, the cantons and municipalities also collect a portion of the tax in Switzerland. And the amount is not the same everywhere.

The Swiss tax system is made up of three levels, which we will examine based on the example of individuals:

1. Direct federal tax: throughout Switzerland

Everyone in Switzerland pays a direct federal tax. This tax on income is collected by the federal government. Private individuals are generally taxed according to their economic capacity. Those who earn more also pay more.

2. State tax: In the respective canton

The 26 cantons of Switzerland each have their own tax laws. They impose different amounts of state tax on income and assets. The tax rate is progressive and depends on the amount of income or assets.

However, the progression and therefore the tax burden varies from canton to canton. Some cantons are more attractive for people with high incomes, while the opposite is true in others.

3 Municipal tax: the individual tax rate of your municipality

Finally, the municipalities also collect taxes on income and assets. These taxes also vary, but always within the scope of the tax law of the respective canton. Therefore, there is also tax competition between the municipalities.

When the location decides

So, when it comes to location – for example when buying a home – it's not just the beautiful surroundings that matter. In Switzerland, the location has a significant influence on how high your tax burden will be. Just as the location determines the romantic atmosphere on a first date.

You do not have to complete a separate tax return for the federal, cantonal and municipal authorities. Although the federal government and the state do collect taxes separately, the tax return and calculation are done collectively. This is when your date with the Swiss tax system starts to get serious.

Let us make your tax return a pleasure!

The conversation: in the tax return, everything is put on the table

At the end of the day, getting to know someone depends on what you tell them about yourself. It's the same with taxes. After all, the tax return is the only date where you really must disclose everything. The Swiss tax system places more trust in you than some partners: the Swiss tax authorities only know your exact income and wealth once you disclosed it.

Filing your tax return correctly

All worldwide income and assets that fall within the respective tax period are declared in the tax return. So yes, even the holiday home on Mallorca! There are also deductions that reduce your tax burden.

The following people complete a tax return in Switzerland:

• All Swiss nationals and everybody with a permanent residence permit C.

• All legal entities and companies that conduct business in Switzerland.

• Under certain circumstances, foreign nationals without a C permit who are self-employed, for example, or whose income is above a certain limit.

  
  

The tax return determines how much in federal, cantonal and communal taxes are due. Because the Swiss tax authorities only find out the amount of your income and assets through this process, it is particularly important to provide accurate and complete information. Once again, the same applies to taxes as to dating: trust should not be risked, but rather valued.

Tax returns are often a nerve-wracking experience, especially for expats, individuals with a complex situation or self-employed people. But there is no reason to be nervous. With the right advice, tax returns are (almost) a pleasure.  Just give us a call. We'll do it together.

That certain something: this is where the Swiss tax system gets exciting

Let's be honest: taxes are not really an attractive topic. But that's most likely not because of the Swiss tax system. It's because of how sober and boring it is usually viewed. After all, that's not how a really good date should be. What we need is that certain something – and the taxes have it too.

If there's one thing you'll remember from your date with the Swiss tax system, it's that private capital gains are tax-free in Switzerland. This means you can increase your assets, for example through shares, without paying taxes on the gains. This might be one of the reasons why Switzerland is considered by some to be a particularly attractive tax location.

Fancy a rendezvous with the Swiss tax system?

The Swiss tax system only seems difficult to understand at first glance. The closer you look at it, the more logically it is designed. It may not be love at first sight – but who knows if that even exists. As your tax partner, we prefer to take a closer look anyway.  That's why taxum AG is here to assist you with all tax matters.

And just like that... the Swiss tax system is no longer all that complicated.