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This is my little guide to the Swiss tax system. It's not the most exciting topic, but for those of us with limited German or financial skills, filling out your first Swiss tax return can be a pretty daunting task.
In this guide, you'll learn the basics of the Swiss tax system, find out how to get started with your personal tax return, and get some hints and tips on discounts to help you along the way.
By the end of this little guide, you should have a basic understanding of taxes in Switzerland and (hopefully) feel a little more confident when you fill out your next tax return. Also, you should save a few CHF this way. Which is never a bad thing.
If you like this tax guide, you should also check out my monster guide to investing in Switzerland. It covers a lot of topics to invest in Switzerland and is worth reading. Plus, there are more corny jokes to be had.
Sounds good? Then we start right away.
🎁 Reader Bonus: If you need help filling out your Swiss tax return or have general questions about taxes that aren't covered here – shoot me an email.
For whom is this little guide intended?
This little guide was put together for different locals and foreigners living in Switzerland. Similar to the topic of investing (see my guide on this), after arriving in Switzerland it was a bit confusing to understand the Swiss tax system and file my tax return.
Maybe you've just moved to Switzerland and haven't yet understood what you need to do for your income declaration and when.
Or you may be wondering, "When is the Swiss tax return due??" "How much tax do you have to pay?"And: "Do foreigners have to pay taxes at all??!"
You might also freak out and feel a little sick when another tax bill comes in. This is basically true for everyone. So how can you optimize your Swiss taxes? What can you deduct to reduce the amount of tax you have to pay each year?
Does this sound like you can identify with the above points? Then this little guide is just right for you.
A brief introduction to the Swiss tax system
Let's get right to the point: there are four main levels of income tax in Switzerland:
- Federal (the state)
- Canton (z. B. Zurich)
- community (e.g. B. a city in Zurich)
- Church (depending on your faith)
This means that there is no single tax number you can use to calculate your total tax burden. Funny!
In general, tax rates in Switzerland are progressive (z. B. based on a range), so that people with higher income and assets pay more taxes than people with lower. The amount of tax you pay also depends on your personal status, for example whether you are married or single – and whether you have children or not.
We'll see later that the canton you live in also has a big influence on this.
How much tax you pay in Switzerland?
To find out how much tax you'll have to pay in Switzerland, let's first break down the individual parts that contribute to your total income tax burden.
The federal tax rates are set by the state and are the same throughout Switzerland.
These tax rates are progressive and based on your taxable income and whether you are married. To avoid confusion, let's first take a look at all the tax rates for single people in the table below.
Example: If you are single and your taxable income is 120.If your taxable income is CHF 000 per year, you fall into the range above.
You may think that you 8.8% of 120.000 you pay, but this is not correct. Based on a complicated accounting term called "marginal tax rate", you pay the basic amount (3.100) of the band and then the 8.8% on the additional amount.
Maybe an example will help you.
A salary of 120.000 falls within the range shown above of 103.600 to 134.600. Understand?
So you have 120.000 minus 103.600, what 16.400 results, which are taxed at 8.8 % = 1.400 CHF. Add this to the base amount of 3.Add 100 and you get a total estimated tax bill of 4.500 CHF.
In our example with 120.000 CHF taxable income, the federal tax rates vary slightly if you are married (see below). If you crunch the numbers (all else being equal), you'll pay about 3.100 CHF:
The fact that you are married has a significant impact on your tax rates.
At the beginning of the year, you'll receive a nice orange bill with an estimate based on the previous year, which you can review by 31. March you have to pay.
If there are differences from this amount after you have completed your taxes for the current year, you will either receive a tax refund later in the year – or another bill to make up the difference. For example, if you received a substantial salary increase in 2020, you will probably be able to take out a vacation loan in 2021 after 31. March receive another bill for federal income tax.
Ok, that was the federal tax. Let's continue.
Switzerland consists of 26 individual cantons, which all have different tax rates. So, depending on where you live, you will pay a different amount of income tax. And within Switzerland there can be big differences between the cantons – especially if you compare the French and German cantons of Switzerland.
The cantonal tax generally makes up the largest part of your tax bill and is the one you'll spend the most time and effort on.
Cantonal tax rates in Switzerland
The following list shows the different tax rates in Switzerland. As mentioned above, there are significant differences between cantons, which add up considerably in the long run.
For those who have not yet moved to Switzerland, but are considering a move, the list above is food for thought.
Especially when you consider that Switzerland has an excellent public transportation network (it's only 34 minutes by train from Zug to Zurich, for example), so changing your canton of residence and work is one way to achieve tax savings. But of course there are many other factors to consider when choosing a place to live.
The canton sends you your tax documents at the beginning of the year and you have a few months to collect all the statements and complete the information before sending them back to the canton's tax department.
This is about the municipality where you live and, among other things, the cost of street sweepers and snow gritters in winter.
As with the cantons, there can also be large differences in municipal tax rates in Switzerland. For example, if you are single, live in the canton of Zurich and have 120.000 euros per year, the municipal tax for Winterthur is 9.400, while in Uster 8.400 and in Horgen 6.500 is.
Of course, some of these lower-taxed towns and villages are not suitable and accessible for everyone – and often charge higher prices for rent and related services.
You can find a comprehensive overview of municipal tax rates on the comparis website:
Together with the cantonal tax rates, these two pillars make up the largest part of the taxes you have to pay.
This is, in summary, the topic of municipal taxes.
Church taxes are bundled into your cantonal tax bill and calculated based on your religious affiliation – whether Roman Catholic, Old Catholic or Protestant. If you are not religious or your religion is not one of the three religions recognized in Switzerland, you can voluntarily opt out and be classified as "religionless". This change will reduce your church tax to zero.
Church tax is usually about 1% – for example, in Zurich it's 0.7%, in Aargau it's 1.5%, and in Lucerne it's 1% – and in some cantons like Geneva and Neuchatel it's 0%. Please note that these are approximate values and may be slightly higher.
In most cases, the four areas above account for the bulk of your tax bill. However, additional taxes that affect your tax bill include wealth taxes, inheritance and gift taxes, stamp taxes, and foreign real estate.
I'll save the details of this for another blog post, but in general you'll probably need to consider these at some point in the future as well.
Swiss tax calculator and tools
Now that you know the different areas where taxes are calculated, you can start calculating your total tax burden.
The map below shows how much this will be, and includes federal, cantonal and local taxes:
For more calculators and tools, check out these links where you can enter your numbers:
📝 Note to readers: If you would like an expert to calculate your exact personal tax rates, email me and I will connect you with someone.
How do Swiss taxes compare to other countries??
Switzerland compares favorably with other countries in Europe and beyond.
It depends on your canton, but in Zurich, for example, the tax rate on a taxable income of 100 is.000 Euro around 24. Compared to countries like Denmark, France and Austria, which charge 50%, Switzerland is much lower.
On the other hand, countries like Estonia, Hungary and the Czech Republic have a personal income tax rate of about 15. The Bahamas, Monaco and the United Arab Emirates all have 0% income tax, but (with the exception of the United Arab Emirates) are not too realistic for most readers of this blog.
And when you take everything else into account (quality of life, location, transportation network, cheese…), Switzerland compares very well, even to the Bahamas.
Is Switzerland a tax paradise?
As you can see from the section above and the cantonal breakdown, Switzerland is an attractive place to have your assets calculated for tax purposes. Especially for companies and foreign investors Switzerland offers very favorable tax rates.
This "business friendly" attitude and the competition between cantons in setting their own tax rates contribute to the fact that Switzerland continuously offers a good tax environment.
In the past, Switzerland was considered a "tax haven" to some extent (partly wrongly due to the old Swiss banking secrecy), but today this is no longer quite true. As of 2019, Switzerland is fully compliant with international tax standards, but continues to innovate and offer attractive tax rates for individuals and businesses.
Still, large multinational corporations have long used the Swiss system to avoid taxes – $12.8 billion still does so today.
When are Swiss tax returns due?
The deadline for filing your Swiss tax return depends on the canton you live in, but it is usually due by the end of March. In Zurich, Aargau, Lucerne, Geneva and other cantons, for example, it is due at the end of March.
This deadline can be extended upon request, by how much again depends on the canton, but usually a maximum of 6-7 months in the same year.
How to optimize your tax return
There are many ways in which you can donate legally (e.g. to a charity). B. without hiding paper franc notes under your mattress) can reduce the amount of tax you pay. It is worth familiarizing yourself with the items you can claim in your tax return. The long-term savings in CHF are substantial.
Here are some examples of expenses you can deduct:
- Swiss charitable donations
- Day care centers
- Costs for commuting and working meals
- Cost of labor (z. B. Training, software)
- Health insurance
- Contributions to pillar 3A
- Mortgage interest payments
- Renovation and maintenance
- Bank charges and asset management fees
- Medical expenses (doctors, dentists, etc.)
- Education and training
🎁 Reader Bonus: If you'd like more details on tax deductions by canton and the respective amounts you can deduct, email me.
Search for a certified Swiss tax expert
If you don't have the confidence to fill out your tax return yourself, you should consider the assistance of a tax advisor. A Swiss tax expert will be able to do the above in a jiffy and have certified expertise to help your tax returns.
Of course, you'll pay a fee for this, which is around CHF 800 depending on the complexity of your personal situation, but it's usually no higher than that.
For some, this is a worthwhile option to sit back and make sure you're doing everything right. At least for the first tax return you can use as a template in the future. Using a tax expert or tax firm will also allow you to better plan your taxes, and you can be used as an "agent" to answer questions from the tax office and organize necessary extensions to avoid missing deadlines.
A tax advisor can also help you maximize your deductions, so you'll likely see some additional annual savings.
A word of warning when looking for tax experts abroad.
Care should be taken when searching for a Swiss tax advisor, especially if you live abroad. The financial sector in Switzerland is littered with insurance salesmen who see a "tax return" as a foot in the door to later sell overpriced life insurance, annuities and investment products.
This is by no means a dig at all regulated and credible tax and financial planners in Switzerland, of which there are many. But my personal experience shows that this is an area that needs careful research.
What you should watch out for:
- The tax consultant should offer a fixed fee for all tax consulting services.
- The tax advisor should be accredited and qualified. Do your due diligence.
- The tax advisor should not promote Pillar 3A (private pension) products or life insurance policies as part of your tax advice. This is a big warning sign. More about my nightmare on this here.
🎁 Reader Bonus: If you're having trouble finding a tax advisor and need help filling out your Swiss tax return, or if you have general questions about taxes that aren't covered in this article, shoot me an email.
Hopefully, the above has given you a basic understanding of the Swiss tax system and some ideas on how to optimize your situation in the upcoming tax season.
It's important to know when you can expect the bills and what you can deduct. So do your research, observe the deadlines in your canton and take enough time.
As with my other topics, I will also expand this tax series in the near future.
I'm anonymous on the blog, so I guess you can call me 'Mr Investing Hero', or 'Mr IH' for short 🙈
I'm a British expat who's been living in Switzerland for the last 10 years. I'm a digital marketing professional by day, and a finance and investing blogger by night.