The Swiss Tax System is an intriguing departure from what you may have become used to in your home country. Whilst there is a national income tax (Bundesteuer), this is not the most important tax.
Switzerland has 26 Cantons, and this means by their independent nature they came up with 26 different tax systems. Then within each Canton the taxes change from community to community. It sounds complicated (and it is) but at the end of the day tax bills are a lot less than in Germany and France, and a little below those in the UK. US citizens will have to continue filing their US returns in addition to a Swiss one, and we can help with both of these.
Income Tax
The main tax is income tax. This is due on your worldwide income if you are resident in Switzerland. Instead of having just one or two bands of income, the Swiss have devised a system with hundreds, if not thousands of bands of income. In fact, for every Fr. 100.- of extra income you earn per year, the percentage tax rate applied to your total income changes by a fraction of one percent.
Church taxes are payable if you are the member of a recognised religion. Depending on the religion you declare on your work permit application form your church tax deductions will go to the religion you specify.
There is a wide range of possibilities in Switzerland to reduce your tax bill, particularly in the field of expenses and interest payments. In fact, most interest bearing debts are completely deductible against tax.
This is why most Swiss people never pay off their mortgages: why pay off a loan that only costs about 3% to 4% to maintain when the money can earn more elsewhere and reduce your overall tax rate into the bargain. Bank loans interest is also allowable against your total taxable income, but leasing costs are not.
To find out how you can save sometimes thousands of Francs per year contact us and find out more.
Find out about the Basel Tax System.
Capital Taxes
There is no Capital Gains Tax for private investors in Switzerland except on Property. Companies and professional investors do have to pay it. Regular share traders can be classified as professional investors even if they have a different full time job.
Wealth Tax
Wealth Tax, or Vermögensteuer, is charged against your total Net Worth, usually at a very low percentage. Included in the list of assets to be taken into consideration are your house and any properties held outside of Switzerland, your shares, investment funds (both Swiss and Offshore), property outside of Switzerland, gold coins and all other valuables.
Even if you have assets or property in another country, they must be declared to the Swiss authorities, whether or not tax has been collected on them elsewhere. Reference to the relevant double taxation treaty will determine whether you will have to pay tax in both jurisdictions.
Inheritance Taxes
In Switzerland, Inheritance Tax is a Cantonal tax and so each Canton has its own set of rules. However, for the most part surviving spouses and and in some Cantons even children do not have to pay any inheritance tax. In Basel (Stadt and Land) children do have to pay, but not very much.
If you are British and “permanently resident” in Switzerland you may still be at risk from inheritance tax if your Domicile of Origin (ie the UK) has not been replaced by a Domicile of Choice (ie Switzerland). UK Inheritance Tax isn’t called the “Voluntary Tax” for nothing as there are many ways to plan your way around it. But just being resident in Switzerland is not enough on its own to avoid the UK tax which is charged at 40% on your taxable estate from around the world.
If you want to know more, please call us to discuss the best solution to fit your own needs.