Expats living and working in Switzerland are required to pay Swiss taxes. The taxation system in Switzerland is complex as the 26 cantons and almost 2300 municipalities levy different taxes. Managing your money in a different country can seem daunting, so to make things simpler here are ten finance tips that should come in handy when moving to Switzerland.
1. Commercial companies in Switzerland are not exempt from taxation. If you are working for one of them, you are liable to pay taxes. But the other factor that can affect your income tax bracket is the location you choose to live. It is cheaper to live in some cantons such as Fribourg, Uri, Glarus and Appenzell Innerrhoden, while cantons like Geneva, Basel-Stadt, Vaud, Basel-Land and Zurich can be very expensive.2. Married couples are jointly assessed when it come taxes, if both are employed. Married couples living together, where one partner is employed and the other looks after the children at home, may be eligible for a tax break. This tax break can even amount to an average salary that a full-time job pays in some of the surrounding European Union countries. Retirees can avail themselves of the ‘lump sum taxation’ program in Switzerland, by which they can pay a lump sum to a canton and receive a residence permit in return. Individuals above 60 years of age with sufficient finances can become part of this scheme, which is common in places like Zurich, Bern and Geneva, which have the highest population of foreigners.
3. Expats can also receive a tax break in the form of housing allowance. This is meant to cover housing and other costs of relocating to a different country. The tax break can be up to 10 percent of the base salary.
4. Paying the maximum amount allowed towards Pillar 2 of the Swiss pension plan is tax-free and can be transferred once you leave the country. It can also be used to buy property in Switzerland without extra taxes. Switzerland’s national pension plan is based on three pillars or columns of social security. According to Pillar 2, every individual who earns above 21,060 CHF annually automatically becomes part of a company pension plan.
5. Your employer or company in Switzerland is likely to handle all salary related matters for you, but it may still be a good idea to consult an accountant. This can help you save more from year to year.
6. Switzerland is not in the EU and therefore you can get a VAT refund on goods you buy in any of the EU countries. In France and other EU countries the VAT is 19.6 percent. On importing the goods back into Switzerland, you can pay the Swiss VAT, which is 8 percent, enabling you to save the rest of the amount. The favorable Swiss-Euro exchange rate also works in your favor. Getting VAT refunds is especially beneficial if you have purchased high value goods abroad.
7. Once expats receive their residence permits in Switzerland, they will no longer be taxed at the source, something that happens in the other European countries. Keep in mind that after this point you will receive notifications around April or May to settle your taxation for the previous year. Make sure you have sufficient finances for this. This also applies to expats who buy property in Switzerland and those who marry someone who has a permanent residency permit or Swiss nationality.
8. A good way to save money in Switzerland is to use public transport. Yes, petrol is cheaper in the country than it is in Italy or France, but the Swiss public transport system is still the more economic option. Apart from buses and trains, there is also an extensive network of bicycle routes.
9. When looking for the right accommodation, only consider buying property if you will be living in the country for more than a few years. Many expats choose to rent first and buy later after they are familiar with the location.
10. Expats who speak any of the local languages usually prefer to also open an account in a cantonal bank. These banks represent a smaller section of people in their respective cantons and provide all the basic banking services, with a more personal touch.