Understanding the Swiss tax system

The Swiss tax system also applies to residents of a foreign origin, although there are numerous categories that could be exempt from taxes entirely, or those that will be able to claim selected exemptions and expenses.

Even though taxes in the country are not as high as most other European nations, when compared with other states with lower levels, tax brackets in Switzerland are significant, with the highest typically hovering at around 17%.

In order to be able to take advantage of the exemptions that might apply to you as a foreigner working in the country, you will have to make the claims while you are filling your tax returns, before which it is advised that you take a detailed look at the documentation and consult with a professional.

The country has a federal constitution that applies throughout its territory, with 26 others that have been promulgated by each of the cantons in the country.

Alongside this, there are municipalities, which also have the ability to levy taxes, making the entire taxation system quite complicated to say the least.  

As such, there are different rules that apply to residents and foreigners, with different tax brackets depending on the income of the individual, and the locality in question. The differences can be quite stark across the different geographic regions.

Tax system obligations

Residents in Switzerland, whether temporary or permanent have the same obligations as citizens when it comes to mandated tax payments.

Secondly, Swiss residents are also liable to pay tax on their income and assets that are located outside the country.

The tax obligations are different for people and companies that are not based here, but carry out business that involves the country, thereby only being liable for the funds that are generated there. 

The concept of residence in these cases is made simpler by the explanation that even people who come to the country for small periods of time, but their stay exceeds a three-month period will be considered residents, even if they are not employed during this time.

Owing to recent pressure from other governments due to the tendency of individuals to place their money in the country to evade taxes, the government is in the process of signing agreements with several states, pertaining to the sharing of tax data.

Application of the tax system

The first category of taxes in the country applies to personal income, including remuneration and assets.

The second category applies to the purchase of items and services, through value added tax.

The application of taxes differs in relation to the sale or property across the many localities, mostly creating exemptions for gift and inheritance tax for immediate family members.

Contact your local branch


Expat tax advice in Switzerland