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Income Tax

Switzerland - Income Tax



Income tax in Switzerland is not a one-size fits all situation and, thanks to cantonal tax autonomy, can vary significantly from one canton to another. It is therefore the case that, for example, someone earning a salary of CHF 100,000 will have net earnings that are greater or lesser depending on residential location within Switzerland. Further factors such as whether you are married and/or have children also come into play.

One word you will hear a lot in Switzerland is Quellensteuer which means withholding tax. In other words, tax is deducted at source. These tax deductions are comprised of federal tax, cantonal tax and communal (as in your commune of residence) tax which are bundled together and automatically deducted from your salary. You may also be liable to pay a church tax. However, once again the situation is not simple, and once your earnings reach a certain amount during the tax year you will also need to file a tax return. In recent years this annual income limit has been CHF 120,000 and applies per household. You do not need to fill out a tax form if earning under this amount, although if you feel you may have been overcharged you can apply for a source tax refund, with the caveat that if calculations indicate you have underpaid you will be billed for the additional amount.

As a very general rule of thumb, expect to pay from around 16% up to 25% of your income in taxes and mandatory social insurances deducted from salary. Note that health insurance is payable separately but must also be accounted for.

The cantonal tax includes a personal income tax applied as a percentage of earnings according to tax bands (i.e. it is normally a progressive tax system, where the higher earners pay more). The rates of personal income taxation can be advantageous for those with average or high incomes in some cantons while taxing one or both heavily elsewhere. Businesses are likewise taxed on profits and on capital by the canton.

Different rules apply to the super rich who have traditionally viewed Switzerland as something of a tax haven. You may have heard about a flat rate tax (die Pauschalbesteuerung) which was advantageous for wealthy foreigners and attracted a number of very high-income (and high profile) expats to Switzerland. While the average expat working in Switzerland or joining a spouse there would not have been able to profit from this scheme, it may be worth noting that in any case it was abolished in Zurich canton at the beginning of 2010 and other cantons have since pushed for higher taxation rates for the super-wealthy.

You can obtain the necessary forms for your tax return from the Gemeinde. As previously mentioned, you are required to file the tax return if you are earning in excess of CHF 120,000 per annum. You would also have to complete it even without reaching this limit if you have another substantial source of income in addition to your salary, or if you hold a C permit. This applies regardless of where you live within Switzerland. All Swiss citizens must also complete a tax return. An earning spouse of someone who fills in a tax return will also have to do so, as in Switzerland the tax band is determined by joint income. Unfortunately, this practice means that dual-income married couples with high wages can end up worse off than non-married couples or singles. If you have already had tax deducted at source (i.e have paid Quellensteuer) this is taken into account when the tax authorities calculate your tax bill (Definitive Rechnung). To avoid paying interest on tax that you owe, ensure you complete your tax form for the previous calendar year by 31st March. Extensions to this date need to be arranged with the tax authorities.

Most of the countries from which expats in Switzerland originate will have tax agreements in place that allow foreign nationals to be taxed in Switzerland and not in their home country. This is not the case for US citizens and green card holders, who must still be assessed by the IRS as well as the Swiss Federal Tax Administration. As this situation is complex and can vary according to individual circumstances, you may wish to seek professional advice.

An expat allowance in the form of a non-taxable deduction of CHF 1,500 monthly for living expenses may be applicable if you are only working in Switzerland temporarily and have a fixed address in your home country. Address queries about this to your employer who should be able to advise.


Useful Resources

Zurich Tax Office
http://www.steueramt.zh.ch/internet/finanzdirektion/ksta/de/home.html
Kantonales Steueramt Zürich, Bändliweg 21, Postfach, 8090 Zürich
Tel: 043 259 40 50

Geneva Tax Office
http://ge.ch/impots/
Administration Fiscale Cantonale, Hôtel des finances, 26, rue du Stand, Case Postale 3937, 1211 Genève 3
Tel: 022 327 70 00

Basel (City) Tax Office
http://www.steuerverwaltung.bs.ch/
Steuerverwaltung des Kantons Basel-Stadt, Fischmarkt 10, CH-4001 Basel
Tel: 061 267 46 46
Email: steuerverwaltung@bs.ch

Bern Tax Office
http://www.fin.be.ch/fin/de/index/steuern.html
Steuerverwaltung des Kantons Bern
Postfach 8334, 3001 Bern
Tel: 031 633 60 01

comparis.ch Tax Calculator
For an approximate idea of your tax deductions (do not take figures as accurate but simply use as a starting point)
http://en.comparis.ch/steuern/steuervergleich/default.aspx




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