Switzerland tax system: audit, reporting and optimization of taxation of Swiss companies and individuals: VAT, income tax and capital gains
Basic taxes (briefly)
|Corporate tax (in detail)||The federal rate on net income is 8.5%, since income and capital taxes can be deducted when calculating taxable income, the real rate is 7.8%. Depending on the location of the company, the total tax rate, including federal, cantonal and municipal levels, ranges from 11.9% to 21.6%|
|Capital gains tax. Details||Capital gains are included in taxable profits and subject to normal corporate income tax|
|VAT. Details||The standard VAT rate is 7.7%. Reduced rates of 2.5% and 3.7% apply to some goods and services|
|Other taxes||Social contributions, Capital tax, Personal net asset tax, Inheritance and gift tax|
International tax agreement
|Albania, Algeria, Antigua and Barbuda, Argentina, Armenia, Australia, Austria, Azerbaijan, Bangladesh, Barbados, Belarus, Belgium, Bulgaria, Canada, Chile, China, Chinese Taipei, Colombia, Croatia, Czech Republic, Côte d'Ivoire, Denmark, Dominica, Ecuador, Egypt, Estonia, Faroe Islands, Finland, Former Yugoslav Republic of Macedonia, France, Georgia, Germany, Ghana, Greece, Grenada, Guernsey, Hong Kong (China), Hungary, Iceland, India, Indonesia, Iran, Ireland, Israel, Italy, Jamaica, Japan, Kazakhstan, Korea (Republic of), Kuwait, Kyrgyzstan, Latvia, Liechtenstein, Lithuania, Luxembourg, Malaysia, Malta, Mexico, Moldova (Republic of), Mongolia, Montenegro, Montserrat, Morocco, Netherlands, New Zealand, Norway, Oman, Pakistan, Peru, Philippines, Poland, Portugal, Qatar, Romania, Russian Federation, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Serbia, Singapore, Slovakia, Slovenia, South Africa, Spain, Sri Lanka, Sweden, Tajikistan, Thailand, Trinidad and Tobago, Tunisia, Turkey, Turkmenistan, Ukraine, United Arab Emirates, United Kingdom, United States, Uruguay, Uzbekistan, Venezuela, Viet nam, Virgin Islands (British)|
|Andorra, Belize, Brazil, Grenada, Guernsey, Isle of Man, Jersey, San Marino, Seychelles|
Personal income tax
Tax residents pay tax on their worldwide income. Income from foreign real estate and foreign businesses is tax exempt in Switzerland but is taken into account when determining the tax rates that will apply to the rest of the income.
Non-residents are subject to tax on income from Swiss sources.
The tax is levied at the federal, cantonal, and communal levels. Taxes are levied at a progressive scale that varies depending on the taxpayer's marital status.
Federal tax rates generally range from 0% to 11.5%.
Cantonal taxes differ not only in rates, but also in the income levels to which the rates apply. The rates can vary by half from canton to canton; the total maximum marginal rates can be over 40%. However, the total effective rates are substantially lower. For example: for a single taxpayer with an annual salary income of CHF 150,000, the total effective tax rate, including federal, cantonal, and communal tax, would be around 9% in Zug, 13% in Zurich, 14% in Lucerne, 16% in Geneva and 18% in Lausanne.
Profit from the sale of movable property (for example, shares) is exempt from tax if it is not a business income of the dealer. Profit from the sale of real estate is taxed at the cantonal level. Dividend income is taxed at ordinary rates.
Corporate income tax
Swiss companies pay tax on income generated in Switzerland.
Income attributable to overseas permanent establishments and income from overseas real estate is not taxed but is taken into account in determining the progressive tax rates applicable to other kinds of income.
At the federal level, the tax is levied at the rate of 8.5%. As the tax itself is deductible from the tax base, the effective tax rate is around 7.83%.
Corporate income tax, mainly at a flat rate, is also levied at the cantonal and communal levels. Some cantons and communes have a progressive tax scale.
Depending on where the company is located, the total tax rate, including federal, cantonal, and communal tax, ranges from 11.9% to 21.6%. The corporate income tax rate, including federal, cantonal, and communal tax, is 11.95% in Zug, 21.15% in Zurich, 12.32% in Lucerne, and 14% in Geneva.
Dividends are tax exempt if there is at least 10% participation in the capital of the distributing company, or if the market value of the participation interest is at least CHF 1 million.
Profit from the sale of shares is tax exempt if at least 10% of the company's capital has been held for at least one year. When selling the remaining shareholding, if it is less than 10% of the company’s capital (due to the previous sale), an exemption is provided if the market value of the remaining shares is at least CHF 1 million.
Switzerland has no CFC rules.
Dividends paid are taxed at the rate of 35%.
A 35% tax is withheld on interest from Swiss bonds and bank accounts. There is no withholding tax on interest on ordinary loans.
No tax is withheld on royalty payments.
Tax rates are reduceable under double tax treaties and agreements with the EU.
Although Switzerland is not an EU member state, its value added tax (VAT) system was structured in accordance with the sixth EU VAT Directive (“Sixth Council Directive on the harmonization of the laws of the Member States relating to turnover taxes”). As a result, Swiss VAT applies to the sale of goods and services in Switzerland, and to the import of goods and services into Switzerland at the federal level only. Exports of goods and services are, in principle, zero-rated.
The standard VAT rate is 8% since January 2011. Certain goods and services are subject to a reduced rate of 2.5% (e.g. water supply, food) and others (e.g. most banking services) are exempt. A special 3.8% rate applies to the hotel and lodging industry.
Social security contributions
Social security contributions are paid by both employer and employee at the same rate of 5.3% for old age and disability insurance, at 1.1% for unemployment insurance on remuneration up to CHF 148,200 and 0.5% on the excess.
Employers also pay contributions to the family compensation fund at the rates from 1 to 3%, and contributions for occupational accident insurance at the rates from 0.17 to 13.5% for remuneration up to CHF 148,200.
Employees pay occupational accident insurance premiums at rates ranging from 1% to 4% on remuneration up to CHF 148,200. There are also contributions for occupational pensions and health insurance.
Cantons and communes levy tax on the capital of companies.
Tax rates range from 0.001% to 0.508% depending on the place of corporate residence of the company in Switzerland.
VAT returns must be filed quarterly, and the relevant VAT amount remitted to the federal tax office.
Capital contributions are subject to a 1% stamp duty, with exemption for the first CHF 1 million.
Securities transactions involving Swiss dealers are taxed at the rate of 0.15% for Swiss securities and at the rate of 0.3% for foreign securities.
Personal net wealth tax
All cantons levy a tax on net assets – the difference between the market value of assets and the taxpayer's debt. Taxable assets include, among others, bank balances, securities, participations in companies, real estate, cars, paintings, etc.
Tax rates are progressive and depend on the canton and commune, as well as the family status of the taxpayer.
Inheritance and gift tax
Cantonal taxes are paid at progressive rates.
There are exemptions for close relatives.
Double tax agreements
Switzerland participates in various international tax mechanisms, including:
106 DTCs: Albania, Algeria, Anguilla, Antigua and Barbuda, Argentina, Armenia, Australia, Austria, Azerbaijan, Bangladesh, Barbados, Belarus, Belgium, Belize, Bulgaria, Canada, Chile, China, Colombia, Cote d'Ivoire, Croatia, Cyprus, Czech Republic, Denmark, Dominica, Ecuador, Egypt, Estonia, Faroe Islands, Finland, France, Gambia, Georgia, Germany, Ghana, Greece, Grenada, Guernsey, Hong Kong, Hungary, Iceland, India, Indonesia, Iran, Ireland, Israel, Italy, Jamaica, Japan, Kazakhstan, Korea (Republic of), Kuwait, Kyrgyzstan, Latvia, Liechtenstein, Lithuania, Luxembourg, Macedonia, Malawi, Malaysia, Malta, Mexico, Moldova, Mongolia, Montenegro, Montserrat, Morocco, Netherlands, New Zealand, Norway, Oman, Pakistan, Peru, Philippines, Poland, Portugal, Qatar, Romania, Russian Federation, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, San Marino, Serbia, Singapore, Slovakia, Slovenia, South Africa, Spain, Sri Lanka, Sweden, Taipei, Tajikistan, Thailand, Trinidad and Tobago, Tunisia, Turkey, Turkmenistan, UAE, Ukraine, United Kingdom, Uruguay, USA, Uzbekistan, Venezuela, Vietnam, Virgin Islands (British), Zambia.
10 TIEA: Andorra, Belize, Brazil, Greenland, Grenada, Guernsey, Isle of Man, Jersey, San Marino, Seychelles.
Switzerland has no exchange control.
Taxes of Switzerland
|Min. rate for corporate tax||11,9-21,6%|
|Capital gains tax||Regular rate|