Taxes in Switzerland

Taxes in Switzerland, Taxation in Switzerland, Taxes system in Switzerland

Switzerland personal Income Tax Individual income tax rates in Switzerland consist of Swiss federal, cantonal and communal taxes. While the maximum rate of federal tax rate is 11.5%, adding the cantonal and communal taxes the total tax burden on individuals change between 22.42% - 42.28% depending on canton. Swiss Individual Income Tax Rates by Canton (rates include Federal Tax, Cantonal Tax, Communal Tax and Church Tax) Canton Tax Rate Jura 42.28% Basel-Land 40.78% Geneva 40.68% Bern 40.44% Vaud 39.40% Zurich 39.18% Ticino 39.11% Basel-Stadt 37.58% Neuchβtel 37.35% Valais 34.97% Solothurn 34.84% Fribourg 34.54% Aargau 34.20% Thurgau 33.92% Glarus 33.83% St. Gallen 32.62% Graubόnden 32.27% Schaffhausen 31.88% Luzern 31.19% Appenzell A.Rh 30.17% Nidwalden 26.13% Appenzell I.Rh 25.65% Uri 25.43% Zug 23.82% Schwyz 23.15% Obwalden 22.42% NOTE: Tax Rates are approximate. Calculations above are based on a single taxpayer with no children. Tax rates may change according to amount of taxable income, marital status, etc. A Swiss resident individual is subject to Swiss federal, cantonal and communal taxes on his worldwide income and net wealth tax, with the exception of income from investments in foreign permanent establishments and real estate situated abroad. Basically, foreigners are regarded as resident from date of registration (usually within one week of arrival where the individual intends to stay permanently in Switzerland). The Confederation and each canton and Commune all have taxing jurisdictions. The cantons levy a wage source tax on salaries paid by domestic employers to expatriates. The tax is deducted monthly from the expatriate's gross income, including any benefits in kind, based on the cantonal tax table. Persons resident abroad and drawing income from or owning net assets in the form of a permanent establishment or real estate in Switzerland are subject to Swiss taxes thereon at the rates that would apply to their total taxable income or net assets. The tax liability is, however, limited to their Swiss taxable income and net assets. Income tax is payable on assessable income less allowable deductions. The assessable income must include, in gross income, all compensation received as salary, living and housing allowances, tax reimbursements and the fair market value of any benefits in kind. Both federal tax rates and cantonal and communal tax rates applicable to individuals are progressive. Furthermore, cantonal income tax rates are a composite of base tax and surtax. In addition to the base tax, the cantons and communes generally levy a surtax expressed as a percentage of the base tax; that is, the cantonal base tax is multiplied by a cantonal factor and a communal factor, both of which are determined annually. Additionally, in most cantons a church tax is imposed on individuals belonging to one of the three recognized churches, being the Protestant, the Roman Catholic and the Christ Catholic churches. For federal tax purposes, no church tax is levied. Church tax is voluntary in Geneva. Swiss Federal Tax Rates for Unmarried Taxpayers Taxable Income (CHF) Tax on Lower Amount (CHF) / Tax on Excess (%) 0 - 13,600: - 0% 13,601 - 29,800: - 0.77% 29,801 - 39,000: 124.70 0.88% 39,001 - 52,000: 205.65 2.64% 52,001 - 68,300: 548.85 2.97% 68,301 - 73,600: 1,032.95 5.94% 73,601 - 97,700: 1,347.75 6.60% 97,701 - 127,100: 2,938.35 8.80% 127,101 - 166,200: 5,525.55 11.00% 166,201 - 712,400: 9,826.55 13.20% 712,401 - 712,500: 81,924.95 0% 712,501 + : 81,937.50 11.50% If taxable income exceeds CHF 712,501 the exceeding income is subject to a flat rate of CHF 11.50%. Swiss Federal Tax Rates for Married Taxpayers Taxable Income (CHF) Tax on Lower Amount (CHF) / Tax on Excess (%) 0 - 26,700: - 0% 26,701 - 47,900: - 1% 47,901 - 54,900: 212.00 2% 54,901 - 70,900: 352.00 3% 70,901 - 85,100: 832.00 4% 85,101 - 97,400: 1,400.00 5% 97,401 - 108,100: 2,015.00 6% 108,101 - 117,000: 2,657.00 7% 117,001 - 124,000: 3,280.00 8% 124,001 - 129,300: 3,840.00 9% 129,301 - 132,900: 4,317.00 10% 132,901 - 134,700: 4,677.00 11% 134,701 - 136,500: 4,875.00 12% 136,501 - 843,600: 5,091.00 13% 843,601 + : 97,014.00 11.5% If taxable income exceeds CHF 843,601, the exceeding income is subject to a flat rate of 11.50%. In addition cantonal and municipal taxes are payable. The tax rates are dependent on the canton in which the individual is resident. There are also net wealth taxes, inheritance and gift taxes levied by some cantons. Basis – Resident individuals are taxed on their worldwide income except for profits from foreign businesses, foreign branches and foreign immovable property, which are tax exempt; nonresidents are taxed on Swiss employment income, business profits and profits attributable to Swiss immovable property. Residence – Residence is determined based on whether an individual intends to stay in Switzerland permanently, as indicated by the location of the centre of personal and business interests, when an individual is present in Switzerland for 30 days to carry out a professional activity or present for at least 90 days. Tax Filing status – A married couple is assessed jointly. Taxable income – Federal income tax applies to all income derived from compensation for work performed and income from capital (both real and movable property). Gross income from Swiss capital is taxable; income from foreign capital is taxed only after deduction of nonrefundable foreign withholding taxes. At the federal level, partial taxation applies to income from participations of at least 10%. Similar relief provisions have been or are being enacted at the cantonal level. Capital gains and capital appreciation derived from the sale or realisation of assets, through the increased value of tangible and intangible assets of a firm are subject to tax. Gains realised on the sale of securities or real property generally are not subject to federal tax. All cantons levy taxes on personal income, with deductions that vary from the federal deductions. Capital gains – Cantons levy a separate capital gains tax on the sale of real property, but no canton levies tax on personal capital gains from movable property that is not considered an asset of a firm. Tax Deductions and allowances – Various expenses may be deducted in computing taxable income, including interest on loans, alimony and certain donations. Personal allowances are granted to the taxpayer, his/her spouse and dependent children. Swiss tax Rates – Tax Rates for federal tax are progressive up to 11.5%. Cantonal/communal income taxes also apply. Other taxes on individuals: Stamp duty – A 1% stamp duty is levied on contributions to the equity of a Swiss company, whether in cash or in kind. A CHF 1 million exempt threshold applies to the issuance of shares. Reorganisations, such as mergers, spin-offs of corporate assets, or transfers of a company's domicile from abroad to Switzerland are typically exempt from the tax. Capital duty – No Capital acquisitions tax – No Real property tax – Some cantons levy real property tax. Inheritance/estate tax – There is no federal inheritance and gift tax, although the cantons may levy the tax. Net wealth/net worth tax – There is no federal tax, but the cantons levy net wealth/net worth tax. Social security – Federal old age and disability insurance (AHV/IV/EO) is mandatory for all employees. The annual contribution of 10.1% of total employee remuneration (with no ceiling) is divided between the employer and employee. Employers are required to deduct contributions from salary payments and remit the total amount to the social security authorities. Professional pension plans are mandatory for employees. Private pension plans are voluntary. Switzerland Tax year – Swiss tax year is the calendar year Tax Filing and payment of tax – Filing deadlines vary from canton to canton and apply for federal and cantonal/communal taxes. Cantons tax at source the wages of foreigners working temporarily in Switzerland (i.e. the employer must deduct the tax from the salary and remit it on behalf of the foreign employee to the tax authorities). Penalties – Penalties apply for late filing or failure to file. Swiss Corporate Taxation Swiss corporate tax is imposed at both federal and cantonal/communal levels. The federal tax rate levied on net income is 8.5%. Since income and capital taxes are deductible in determining taxable income, the effective tax rate is 7.8%. Taking into account both the federal and cantonal/communal income tax, the combined effective income tax rate is typically between 13% and 22% for companies subject to ordinary taxation, depending on the place of residence. Residence – Companies with their legal seat (registered office) or place of effective management in Switzerland are considered resident for tax purposes. Basis – Resident companies are taxed on their worldwide income except for profits derived from foreign branches and foreign immovable property, which are tax exempt. Nonresident companies are taxed on permanent establishment/branch income and/or immovable property located in Switzerland. Taxable income – Corporate income tax is levied on a company's net profits, which consist of business/trading income, passive income and capital gains. Foreign-source income is included in taxable income but relief is granted for dividend income. Business expenses are deductible in computing taxable income. Taxation of dividends – See under "Participation exemption". Capital gains – There is no specific capital gains tax levied at the federal level. Capital gains on the sale of assets are treated as ordinary income (and losses are deductible) regardless of how long the assets have been held. If assets are sold to a shareholder or related corporation at a price below market value, gains may be reassessed for tax purposes. Further, capital gains derived from the sale of a participation of at least 20% (10% as from 1 January 2011) in a resident or nonresident company benefit from participation relief if the participation has been held for more than 1 year. Losses – Losses may be carried forward for 7 fiscal years and may be used against any capital gains or income. Losses may not be carried back. Surtax – No Alternative minimum tax – No Foreign tax credit – Foreign-source income is included in taxable income but relief is granted for dividend income. Foreign-source income is taxed net of foreign taxes; no credit is given for foreign taxes paid (except for nonrefundable withholding taxes on dividends, interest and royalties under applicable tax treaties). Participation exemption – Dividends are generally taxable for the recipient company, although relief is granted for dividends received from a qualifying participation in a resident or nonresident company. A participation is qualifying if the company owns at least 20% (10% as from 1 January 2011) of the capital of the company paying the dividends or the participation has a value of at least CHF 2 million (CHF 1 million as from 1 January 2011). Holding company regime – The holding company tax privilege is granted to companies whose primary statutory purpose is the holding of participations (i.e. when at least 2/3 of the total assets consist of investments in subsidiaries or, alternatively, at least 2/3 of income consists of dividends) and that have no active trade or business in Switzerland. A company that enjoys the holding company privilege is fully exempt from cantonal and communal income taxes. The effective federal income tax rate on nondividend income is 7.8%. Tax Incentives – The mixed company tax privilege is granted to companies with predominantly foreign business activities. A business activity is deemed to be performed predominantly outside of Switzerland if at least 80% of the total gross income is derived from foreign sources and at least 80% of expenses are incurred abroad. Foreignsource income of a mixed company is taxed at a combined effective rate of typically between 9%-11% (including federal tax). Swiss-source income is taxed at ordinary rates for cantonal/communal and federal income tax purposes. Incentives also are available for domiciliary companies, principal companies and finance branches. Tax holidays may apply. Withholding tax: Dividends – Under domestic law, dividends are subject to a 35% withholding tax. Under the Switzerland-EU Savings Agreement, which provides Switzerland access to benefits similar to those in the EC parentsubsidiary directive, withholding tax is reduced to 0% on cross-border payments of dividends between related companies residing in EU member states and Switzerland when the capital participation is 25% or more and certain other criteria are met. In addition, many tax treaties provide for a 0% or 5% residual withholding tax rate for qualifying investments. Interest – Under domestic law, no withholding tax is levied on interest. Exceptions apply to interest derived from deposits with Swiss banks, bonds and bond-like loans, which are subject to a 35% withholding tax at the federal level. Interest paid to nonresidents on receivables secured by Swiss real estate is subject to tax at source. The 35% withholding tax and the tax at source levied under domestic law can be reduced under a tax treaty to typically 0% or 10% with most investor countries. Royalties – Switzerland does not levy withholding tax on royalties. Branch remittance tax – No Other taxes on corporations: Capital duty – No, but see under "Stamp duty". Payroll tax – There is no general payroll tax. Payroll tax is levied only on the wages of foreigners without permanent Swiss residence. For all other employees, wages are taxed as part of ordinary income. Real property tax – Some cantons levy real property tax. Social security contributions – The employer generally is required to pay 50% of an employee's social security and pension fund contributions. Employers must deduct contributions from salary payments and remit the total amount to the social security authorities. Stamp duty – A 1% stamp duty is levied on contributions to the equity of a Swiss company, whether in cash or in kind. A CHF 1 million exemption threshold applies to the issuance of shares. Reorganisations, such as mergers, spin-offs of corporate assets, or transfers of a company's domicile from abroad to Switzerland are typically exempt from the tax. Transfer tax – The transfer of securities by Swiss securities dealers is subject to a 0.15% tax on Swiss securities and 0.3% on foreign securities. Other – Corporate net wealth tax is imposed at varying rates depending on the canton and the type of tax privilege (typically between 0.001% and 0.5%). Anti-avoidance rules: Transfer pricing – Switzerland has no formal transfer pricing legislation or documentation requirements, although all related-party transactions with Swiss entities must be carried out on arm's length terms. In general, Switzerland follows the OECD guidelines on transfer pricing. Thin capitalisation – Safe haven thin capitalisation rules require a minimum equity ratio for each asset class (e.g. receivables may be debt financed by 85%, investments by 70%, intellectual property by 70%). In addition, safe haven interest rates apply. Controlled foreign companies – No Other – Measures against treaty abuse may apply, including a base erosion test. Disclosure requirements – No Swiss Tax year – Switzerland tax year is the accounting year Consolidated tax returns – Switzerland does not allow tax consolidation for income tax purposes; each company must file its own return. Tax Filing requirements – There is combined tax return filing for both federal and cantonal income tax purposes. A self-assessment procedure applies. Filing deadlines depend on the canton. Penalties – Penalties apply for late filing or failure to file. Rulings – Advance rulings may be obtained from the tax authorities on the tax consequences of a planned transaction. Switzerland vat (Mehrwertsteuer) rates Effective 01 January 2011, Swiss VAT rates are as follows: - Standard rate: 8% - Reduced rate (e.g. food, medicine, newspapers, books): 2.8% - Special rate for lodging services: 4% In general, the following transactions of taxable persons are subject to VAT: - supply of goods and services in Switzerland - import of services - import of goods. As per 1 January 2010, a new Swiss VAT Law came into force. The aim of the new VAT Law is to reduce the administrative costs for the VAT registered enterprises and to reduce restrictions on input tax recovery ("shadow tax"). In particular, the following significant improvements have come into force: - Every enterprise will in general be entitled to claim back the full input tax on costs incurred in connection with its business activity. - In principle, holding companies are newly considered as carrying on a business and therefore now benefit from significant improvement in the possibility for reclaiming input tax. - A reduction or correction of the input tax recovered only has to be made in respect of exempt turnover and certain "non-turnover" (e.g. subsidies). - No input tax reduction has to be made as a result of charitable contributions, dividends, financial restructurings, interest-free loans and loan waivers. Furthermore, companies will have increased possibilities to make elections and to voluntarily register for VAT. Registration – The liability to register for VAT is based on annual turnover, which must exceed CHF 100,000 beginning 1 January 2010. Filing and payment – VAT returns must be filed quarterly and the relevant VAT amount remitted to the federal tax authorities.

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