Taxes in Switzerland have long attracted investors and entrepreneurs from around the world. The country’s stable economic environment, high quality of life, and transparent tax system make it an attractive alternative for those planning to develop their businesses. But how exactly does the Swiss tax system work, and what should you pay attention to?
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Taxes in Switzerland – Basic Information
Switzerland is distinguished by its three-tier tax system. It allows cantons and municipalities to set their own tax rates within the framework set by the federal government. The tax structure in Switzerland is presented in the table below.
| Federal taxes | Imposed by the central government throughout the country. They apply to all persons and business entities, regardless of their place of residence or business. |
| Cantonal taxes | Each of Switzerland’s 26 cantons has its own tax regulations. This leads to significant differences in tax rates. |
| Municipal taxes | These regulations apply at the municipal level. It means that tax rates can vary even within a single canton. |
Taxes in Switzerland are determined independently at each level. This means that taxation can vary significantly depending on your location. Below is a comparison of taxes in selected cantons.
Taxes in Switzerland – Types
Switzerland has several main types of taxes that apply to both individuals and legal entities. Below are the most important ones:
| Income tax | – It applies to both natural and legal persons. – Progressive rates for individuals reach up to 40% in some cantons. Yet, the rate can be as low as 12–15% in other business-friendly cantons like Zug or Obwalden. – Legal persons pay tax on net income. |
| Corporate Tax | – Companies operating in Switzerland are required to pay income tax. Its effective rates range from 11% to 21%. – For example, the canton Zug offers one of the lowest corporate taxes in Europe. |
| VAT (MwSt) | – The standard VAT rate is 8%. Reduced rates cover e.g. food (2.5%) and medical services (0%). – Entrepreneurs must register for VAT when their annual revenues exceed 100 000 CHF. – Every foreign taxpayer who wants to do business in Switzerland must appoint a tax representative. |
| Wealth tax | – It concerns natural persons and applies to the net asset value (assets minus liabilities). – Rates are typically below 1%. |
Taxes in Switzerland – Tax Residency
A natural person is considered a tax resident in Switzerland after meeting one of the following conditions:
- Permanent residence, especially with the intent to settle in Switzerland and registration with local authorities.
- Temporary stay of at least 30 days with the intention of earning income.
- Temporary stay of at least 90 days without the intention of working.
On the other hand, individuals who are not tax residents are only taxed on sources of income and wealth located in Switzerland. This applies in particular to:
- wages for physical work performed in Switzerland;
- remuneration of members of the management and supervisory boards in Swiss companies;
- interest on bank accounts in Switzerland;
- real estate located in Switzerland;
- pensions and similar benefits.
Residency regulations apply to both federal and cantonal taxes. There is no minimum stay requirement to be subject to taxation based on local sources of income
Taxes in Switzerland – Tax Benefits
Switzerland is known for its favourable tax arrangements, such as:
- No inheritance and gift tax. This applies only to selected cantons, e.g. Schwyz;
- Preferential taxation for international companies. In some cantons it is possible to negotiate tax rates individually;
- Tax reliefs for the R&D sector. Companies investing in research and development can count on tax deductions. This reduces the effective rates;
- Flat-rate tax for residents. People who live in Switzerland but do not work in Switzerland can pay a tax based on their expenses, not their income.
Taxes in Switzerland – How to Set Up a Company in Switzerland?
Setting up a company in Switzerland is relatively simple. Still, it requires knowledge of local regulations and the preparation of relevant documents. Important steps to follow are:
- Choosing a legal form. The most frequently chosen forms are GmbH (limited liability company) and AG (joint stock company).
- Registration in the Commercial Register. You must register your company with the relevant cantonal registration office.
- Bank Account Opening. Share capital must be paid into a special corporate account prior to registration.
- Obtain a VAT number. If your company’s annual revenue exceeds 100 000 CHF, you must register for VAT.
Taxes in Switzerland – Summary
Taxes in Switzerland offer many opportunities for optimization. This makes the country an attractive destination for entrepreneurs and investors. The three-tier tax system allows the liabilities to be adjusted to the needs. Numerous reliefs and preferences further increase the attractiveness of this country.
Are you planning to start a company or relocate your business to Switzerland? Contact us today for personal advice and support of our experts at every step of the process.
FAQ – Taxes in Switzerland
What are the basic types of taxes in Switzerland?
Federal, cantonal and municipal taxes, including VAT, income and corporate tax.
Is there an inheritance tax in Switzerland?
Not in every canton. It is worth checking local regulations.
What is the VAT rate in Switzerland?
The standard VAT rate is 7.7% and the reduced rate is 2.5% for selected products.
Can tax rates be negotiated?
Yes, Switzerland offers negotiation opportunities for international companies.
Which cantons offer the lowest taxes?
Cantons such as Zug or Obwalden have the most favourable rates.
What are the tax benefits for companies?
Reliefs for research and development, no wealth tax in selected cantons.
Do individuals pay wealth tax?
Yes, but the rates depend on the canton.
How to set up a company in Switzerland?
You need to choose a legal form, register in the commercial register and obtain a VAT number.
Is Switzerland beneficial for tax residents?
Yes, the tax system in Switzerland is flexible and favourable.
Where to find more information about the tax system?
On reliable portals such as local government websites.
