Tax In Switzerland – Things You Need To Know
Top Tax Tips for Expats in Switzerland
Living in Switzerland, there are so many cultural events, sports, weekend trips and so much of this beautiful country to discover, it can be easy to overlook boring things like tax. However, if you are new in Zurich or planning to move to Switzerland soon, one of the things which will become very important sooner or later, is understanding how the tax system works.
Tax In Switzerland Depends On Where You Live
Unlike many other countries, in Switzerland it all comes down to where you live. Each “Canton” has its own tax law and every Gemeinde or Commune has an individual tax multiplier – so there’s a lot to grasp from the moment you set foot on Swiss soil.
On top of that, Health Insurance is an additional (and compulsory) tax, and how much you pay into your pension depends on your employer’s pension plan. Confused already? Don’t worry, help is at hand!
Martin Beiner Experienced Tax Consultant
Martin Beiner is an experienced Tax consultant who has been working in Switzerland, Singapore and Malaysia for over 18 years. As an expat himself, he knows what it is like to start a new life in a new country. For the past 11 years Martin was working in Global Mobility, specialising in individual tax for a big multinational company based in Switzerland. Before that, he worked for the tax authorities in a Zurich Gemeinde, so he has had experience of tax from both sides of the fence.
Martin’s Top Tips On Tax in Switzerland
Martin has put together some of the most important information about tax with reference to the canton of Zurich and most of the German speaking cantons. There may be slight differences here and there based on the local tax practice but hopefully this should give you a good starter.
Before You Move
In Switzerland since every Canton has its own tax law and every Gemeinde or Commune has its own tax multiplier and where you are living on 31st December of the relevant tax year is most important. Financially it can make quite a difference whether you live in the City of Zurich or in a small town outside or in another canton. Tax is not everything, but it makes sense to check the tax levels in the area you are thinking of living, before you actually make the move.
Take a look at the tax calculator of the Swiss tax authorities here to calculate your own tax burden.
Different Taxes You Will Need To Pay
You will need to pay communal tax, cantonal tax and direct federal tax. Also, if you belong to the Roman Catholic, Protestant (or the Christ Catholic Church) you will need to pay Church taxes on top. You will be asked if you attend one of these churches (for other religions the Swiss tax authorities does not collect taxes) when you register at your local Gemeinde.
Couples Taxed As One
Married couples (and same sex registered partnerships) are always taxed as one. Since the tax rates are progressive, this can be a disadvantage if both spouses are working full time, since both incomes will be added together. This is where the term “marriage punishment” comes from.
- Married couples are taxed together as one
- You are taxed dependant on where you are living on 31st December each tax year
- Tax rates are progressive
- There are communal, cantonal and direct federal taxes
- You are liable to pay Church Tax if you belong to the Roman Catholic, Protestant (or the Christ Catholic Church)
Arrival in Switzerland
Arriving in Switzerland as a foreigner you are most likely to get an L or a B permit. While Swiss citizens and C-permit holders pay their taxes directly to the tax authorities, foreigners with any permit other than the C-permit, pay withholding taxes (similar to PAYE for UK people) through the employment income. The employer is responsible for withholding employees’ income taxes.
Also, if you are a foreigner and on anything other than a C Permit, you do not have to file a tax return if
- your annual gross salary does not exceed CHF 120,000
- and your other income (which is not underlying the withholding tax) is below CHF 3’000 or
- your total assets are below CHF 80’000
However, since the tax year 2021 you have to possibility to file a voluntary tax return if you wish to claim additional deductions. But beware: There are a few things to bear in mind when opting for a voluntary tax return.
- An application for a voluntary tax return filing must be submitted by 31 March of the following year.
- If you have opted for a tax return filing, this also applies to future years. Once filing a voluntary return, it becomes mandatory for the subsequent years. It cannot be decided from year to year.
- For married couples or couples in a registered partnership, a joint tax return is carried out. Both spouses must therefore sign the application for a voluntary tax return.
- 4) Not only worldwide income but also worldwide assets must be declared in the tax return.
If your annual gross salary exceeds CHF 120,000 you have to file a tax return for the applicable tax year, as well as for the following years.
C Permit Holders and Swiss Citizens
Swiss citizens and C-permit holders have to file a tax return regardless of the level of income.
- Tax Year: January 1st to December 31st. If you are moving to Switzerland from abroad, the tax year starts with your move.
- Swiss citizens and C-permit holders have to file a tax return
- Other foreigners only have to file a tax return, if their income or assets exceeds a certain amount
- A voluntary tax return can be filed if additional deductions wants to be claimed. Once filing a voluntary return, it becomes mandatory for the subsequent years.
While in Switzerland
5 Top Things For Tax :
- The Filing Deadline for your tax return is usually 31st March of the following year. This means for example, that your 2021 Swiss tax return has to be filed by 31st March 2022. However, you can extend this deadline up to 30th November. The deadline is granted by most tax authorities without any fee. A reason for the extension does not need to be provided. However, the extension needs to be requested before the deadline exceeds. NB: If this deadline has been missed, you may incur a fine.
- Switzerland taxes on Worldwide Income as well as Worldwide Wealth. Therefore you have to declare all your assets and income during the tax year on your Swiss tax return .
- This also includes any Properties you may have Outside Switzerland. The market value of the property abroad needs to be declared, as well as the rental income. If the property is not rented and available for own use (i.e. vacation home) a so called “deemed rental income” will be calculated for income tax purposes. This is a fictitious income, which is added to your total taxable income.
Since the properties are immovable assets, Switzerland is not allowed to tax properties abroad. However, for tax rate purposes, properties outside of Switzerland have to be declared on your Swiss tax return, but will not be taxed in Switzerland – this is called the “exemption with progression” method.
- Interest and Dividends are part of your taxable income. What Switzerland does not need to know about is Capital Gains tax. Any capital gains will not be taxed unless the investor is classified as a professional investor.
- Contributions to the Swiss Social Security System are deductible from your taxable income. Employees have the possibility to contribute voluntary payments to the Swiss social security system through the 2nd Pillar (pension fund which is provided by the employer) or 3rd Pillar (private blocked account which can be opened with Swiss banks or insurances).
Tax Help – Martin Beiner’s Services
If all this has left you wondering if you need advice or assistance, Martin Beiner is available to help you with:
It’s Tax Time – Tax Course about the Swiss tax system for individuals
Learn the basics about the Swiss tax system. Whether you are new to Switzerland or have been living here forever and finally want to understand the Swiss tax system. After this course you will be able to grasp the basics. The course is available in English as well as in German.
Preparation of tax returns for individuals
The preparation of your annual tax return – either assisting you with this task or doing it for you. He can also help with the review of tax assessments and tax bills.
Tax compliance for expats in Switzerland
Martin can also help you with guidance on local tax legislation and answer any questions you may have about Swiss taxation and social security.
Review of prepared tax returns
If you would simply like to have your tax reviewed and get a second opinion, Martin is happy to go through your tax return with you and give you advice.
Martin Beiner, Tax Consultant
Tel: +41 (0) 79 295 58 93
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