The features of Swiss taxes for individuals
Switzerland does not have a single rate of personal income tax or property tax. The Swiss constitution requires that the tax be levied according to the “economic capacity” of the taxpayer. Therefore, there is a progressive scale: the more income and property, the greater the tax burden.
It is important to note that Swiss tax residents with Swiss citizenship, as well as foreigners with a C permit, as well as their spouses and registered partners, are required to file tax returns annually.
For other categories of resident aliens (with some exceptions), there is a tax at source that replaces income tax. The withheld tax is withheld by the employer and transferred directly to the treasury.
Income tax
1. Comparison by cantons
In an international comparison, Switzerland’s tax rates remain among the lowest in the world. However, not all cantons can carry a really low tax burden.
Thus, for highly paid workers who are not exempt from income tax, cantons such as Geneva, Vaud and Neuchâtel are very difficult.A difficult canton for taxing individuals is the canton of Neuchâtel, and wealthy citizens and businesses bypass Neuchâtel.
2. International comparison
The highest tax rate was in Brussels, the capital of Belgium. The person who works there gives the state almost two-thirds of what he earns: 61 percent.
Property tax
Swiss tax residents are required to pay property tax. The latter is established only at the level of the cantons and geminde. There is no federal property tax.
From a civil law perspective, real estate is considered property. However, some cantons distinguish between immovable property and all other property for the purposes of tax law. Accordingly, two types of tax are levied.
Most importantly, the overseas property of Swiss residents is exempt from tax in Switzerland and is only taken into account for progression purposes.
Lump sum tax
Residence permits for a lump-sum tax, instead of income tax, some categories of foreigners have the right to apply for the payment of the so-called “lump tax”.
This tool allows not only to obtain a Swiss residence permit, but in some cases legally save on taxes. Many foreign billionaires and millionaires living in the canton of Geneva and Vaud, in order not to pay regular taxes, prefer the lump-sum tax.
The features of Swiss taxes for legal entities
The average corporate tax rate in Switzerland is 16.6 percent. This figure is almost 2 times less than the average result worldwide – 29 percent. The taxation index takes into account income tax, capital tax, and, in part, land tax.
The most attractive canton for foreign companies is Nidwalden, where companies pay fees of 10.1 percent to the state. This indicator puts the region in second place in the international comparison for corporate tax rates.
The Swiss cantons of Appenzell-Auserrhoden and Lucerne shared third and fourth places with 10.3 percent each. Fifth place went to Hungary – 10.6 percent.
All the remaining places in the top ten were distributed among themselves by the Swiss cantons. The corporate tax rate in Obwalden is 10.9 percent (6) while in Uri it is 11.8 percent (7). Zug charges companies a tax of 12 percent (8), while Schwyz demands a slightly higher 12.1 percent (9). The canton of Graubünden closes the top ten with 12.5 percent. Other Swiss cantons also distinguished themselves by relatively low corporate tax. Thurgau (11), Glarus (12), Schaffhausen (13) and St. Gallen (15) boast a tax rate of less than 15 percent. The administrative capital of Switzerland, Bern, taxes companies at a rate of 17.2 percent (21), while the financial capital, Zurich, 17.5 percent (22). Geneva has the highest corporate tax rate in the Alpine Republic at 21.4 percent (33). For comparison: New York showed the highest result in the international comparison – 40.8 percent.
Tax incentives instead of former privileges
Since 2003, Swiss corporate tax rates have declined significantly in international comparison. This trend did not suit the EU, which forced Switzerland to give up tax privileges for foreign companies.
With the adoption of the abolition of specialized tax privileges, the Swiss authorities have introduced new exemptions that are in line with international requirements.
At the same time, in an attempt to maintain tax attractiveness, a number of cantons intend to reduce income taxes. For example, the canton of Basel-Stadt wants to lower the current rate of 22 percent to 13 percent. Since 2019, the canton of Vaud has introduced a new corporate tax rate of 13.8 percent.
Swiss Dividend Tax Refund
Depending on the recipient of Swiss legal entity dividends, personal income tax (for individual shareholders) or income tax (for corporate shareholders) is charged. Only under certain circumstances can the tax be refunded.
Value Added Tax in Switzerland
There are 3 VAT rates in the Confederation. Even the largest of them (before December 31, 2017 – 8%; from January 1, 2018 – 7.7%) is more than 2 times lower than the average level for European countries.
Inheritance tax in Switzerland
The cantons of Switzerland have the right to impose an inheritance tax. The vast majority of cantons have so far taken advantage of this opportunity. On the contrary, the federal level does not have this competence.
Read more: https://taxtaxation.com/swiss-tax-system/
