Taxation in Switzerland
Taxes in Switzerland are levied by the Swiss Confederation, the cantons and the municipalities.
Working your way through a foreign tax system can be a bit like navigating a particularly tricky maze. And if you’re an expat living in Switzerland you’ll know that what tax you pay depends on not only what you earn, but also your personal circumstances, including precisely where in Switzerland you live.
Constitutional limits to taxation
The federal constitution imposes certain limits on taxation at the federal cantonal and municipal levels. To begin with, it provides that no tax may be levied except where provided for by federal, cantonal or municipal statute. Because statutes can at all levels be made subject to a popular referendum, Swiss tax rates are in practice set directly by the voters through instruments of direct democracy.
The constitution mandates that taxation must be general and equal in nature, and it must be proportionate to one’s ability to pay. The Federal Supreme Court has interpreted this as prohibiting a regressive tax, although flat rate taxes (as instituted in several cantons) are held to be constitutional by tax law scholars. Moreover, double taxation by several cantons is constitutionally prohibited, as is a confiscatory rate of taxation.
The types of taxes in Switzerland can be divided into federal taxes and cantonal and municipal taxes. In order to avoid overlapping taxation Switzerland has concluded almost 50 double taxation agreements with other countries so that foreign investors are protected from double taxation.
Value Added Tax VAT rates in Switzerland
VAT rate of 7.7% applies to most goods and services.
A reduced rate of 2.5% applies to certain everyday consumer goods such as foodstuffs, non-alcoholic beverages, books, newspapers, magazines and medicines.
Overnight stays in hotels (incl. breakfast) are taxed at a special rate of 3.7%.
Avoiding double taxation
The avoidance of double taxation is regulated by international treaties. Switzerland has signed such treaties with over 60 states, including almost all western industrial countries.
Lowest VAT in Europe
Switzerland has the lowest VAT in Europe by far. The normal rate amounts to 8%. Accommodation services are taxed with 3.8%, daily goods are taxed with only 2.5%. Other goods and services such as medical treatment or education are fully excluded from VAT taxation.
No inheritance tax for direct descendants
On the federal level, no inheritance tax applies. In the most cantons direct descendants are excluded from inheritance tax. The rates for inheritance and gift taxes for third parties are between 10 and 50%.
1. Direct federal taxes
The direct federal taxes are as follows:
✓ the taxes on income: personal income tax and corporate tax;
✓ the withholding tax;
✓ the federal casino tax;
✓ the military and civil service exemption tax.
2. Federal taxes on goods and services
The federal taxes on goods and services are the following:
✓ the VAT tax
✓ stamp duties;
✓ the tobacco tax;
✓ the beer tax;
✓ the tax on distilled spirits;
✓ the mineral oil tax;
✓ the motor vehicle tax;
✓ the motorway vignette;
✓ the distance-related heavy vehicle fee;
✓ customs duties.
3. Direct cantonal and municipal taxes
Direct cantonal and municipal taxes in Switzerland include:
✓ taxes on income and on net wealth: income taxes, withholding of tax at source, expenditure based taxation, poll tax, wealth tax, corporate income tax and tax on equity;
✓ inheritance and gift taxes;
✓ lottery income tax;
✓ immovable property gains tax;
✓ real estate tax;
✓ real estate transfer tax;
✓ cantonal casino tax;
✓ trade tax.
4. Cantonal and municipal taxes on goods and services
Cantonal and municipal taxes on goods and services include:
✓ taxes on motor vehicles;
✓ dog taxes;
✓ entertainment tax;
✓ stamp and registration duties;
✓ water duty;
✓ lottery tax;
✓ visitor’s tax.
Cantonal Tax Offices – direct links
✓ Aargau Cantonal Tax Office
✓ Appenzell A. Rh. Cantonal Tax Office
✓ Appenzell I. Rh. Cantonal Tax Office
✓ Basel-Landschaft Cantonal Tax Office
✓ Basel Stadt Cantonal Tax Office
✓ Bern Cantonal Tax Office
✓ Fribourg/Freiburg Cantonal Tax Office
✓ Genève Cantonal Tax Office
✓ Glarus Cantonal Tax Office
✓ Graubünden Cantonal Tax Office
✓ Jura Cantonal Tax Office
✓ Luzern Cantonal Tax Office
✓ Neuchâtel Cantonal Tax Office
✓ Nidwalden Cantonal Tax Office
✓ Obwalden Cantonal Tax Office
✓ Schaffhausen Cantonal Tax Office
✓ Schwyz Cantonal Tax Office
✓ Solothurn Cantonal Tax Office
✓ St. Gallen Cantonal Tax Office
✓ Thurgau Cantonal Tax Office
✓ Ticino Cantonal Tax Office
✓ Uri Cantonal Tax Office
✓ Vaud Cantonal Tax Office
✓ Valais/Wallis Cantonal Tax Office
✓ Zug Cantonal Tax Office
✓ Zürich Cantonal Tax Office