swiss re-location
TRANSCRIPT
RE-LOCATING TO SWITZERLAND:
TAX SYSTEM AT A GLANCE
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AG Aargau AR Appenzell A. Rh. AI Appenzell I. Rh. BL Basel-Land BS Basel-Stadt BE Bern FR Fribourg GE Genève GL Glarus GR Graubünden JU Jura LU Luzern ZG ZugNE Neuchâtel
NW NidwaldenOW ObwaldenSG St. GallenSH SchaffhausenSZ SchwyzSO SolothurnTI TicinoTG ThurgauUR UriVD VaudVS ValaisZG ZugZH Zurich
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Topics of the Swiss Tax System
Switzerland is a Federal State and more precisely a Confederation made of 26 cantons(member states).
Cantons are made up of some 3,000 communes. Cantons are the original holders ofsovereignty.
The Confederation holds those sovereign rights which are expressly granted to it by theFederal Constitution.The extent of the communes’ autonomy is determined by cantonal laws.
There are three levels of taxation in Switzerland:
Federal Taxation, Cantonal Taxation, Communal (Municipal) Taxation.
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Three levels of Taxation
Taxes are collected annually by the also
on behalf of the and under the latter’ssupervision.
are entitled to levy taxes only to the extent
authorized by the cantons.Cantons
CommunesConfederation
Cantons
Confederation
Communes
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Topics of the Swiss Tax System
Taxes levied in Switzerland are subdivided into:
taxes on income and wealth
as well as
consumption, property and expenditure taxes.
The Confederation, the cantons and the communes all levy individual taxes from bothcategories, usually referred to as direct or indirect taxes.
The most important principles for individual taxation may be summarised asfollows: standardised assessment periods for both individuals and legal entities; full taxation of social welfare services and full deduction of premiums paid out; retention of family taxation; moderate taxation of rentable value; tax exemption for (private) capital gains on movable assets and taxation of earnings
derived from the sale of immovables; standardisation of tax deducted at source;
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Topics of the Swiss Tax System
Cantons are authorized to levy any kind of tax provided that it is not within the exclusiveauthority of the Confederation.
The law of December 14, 1990 on the Harmonization of the Direct Taxation of Cantonsand Municipalities which entered into force on January 1, 1993 states which taxes theCantons must impose and how those should be assessed.
Municipalities are entitled to levy taxes only to the extent authorized by the Cantons. Insome Cantons the municipalities have their own tax legislation, in other Cantons theirauthority to levy taxes is based on Cantonal law.
The municipal taxes on income and on net wealth are in most cases levied as apercentage or multiple of the basic Cantonal tax rate.
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Three levels of Taxation
Confederation:
Income tax Withholding tax Tax on net profits Value Added Tax Customs duties Military and civil service
exemption tax Stamp duties Tobacco tax Beer tax Tax on distilled spirits Tax on mineral oil Motor vehicle tax
26 Cantons:
Income and wealth taxes Poll tax or household tax Tax on net profits and
capital Inheritance and gift taxes Immovable property
gains tax Real estate tax Transfer tax of
immovable property Motor vehicle tax Dog tax Entertainment tax Stamp duties Tax on hydraulic power
stations Sundry taxes
2’721 Communes:
Income and wealth taxes Poll tax or household tax Tax on net profits and
capital Inheritance and gift taxes Immovable property
gains tax Real estate tax Transfer tax of
immovable properties Trade tax Dog tax Entertainment tax Sundry taxes
: INDIRECT TAXES
: INCOME & WEALTH TAXES
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Federal Taxation:Income Taxes and other direct taxes
For individuals, income tax is generally assessed annually on the basis of the actual incomeearned (cash method).
Taxes are collected annually by the cantons also on behalf of the Confederation and under thelatter’s supervision.
Residents or temporary residents engaged in gainful activities in Switzerland are, as a rule,subject to unlimited tax liability.
Limited tax liability applies to non-residents having specific economic relations withSwitzerland. In such cases, tax is not levied on a worldwide basis but only on specific items ofincome having their source in Switzerland (limited tax liability).
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Federal Taxation:Taxes on income
Total income is subject to Direct Federal Tax, e.g.:
✘ Income from dependent and independent gainful employment;✘ Compensatory income (such as annuities and pensions);✘ Subsidiary income (such as seniority allowances and tips);✘ Income from movable and immovable property;✘ Capital gains and increases in value of property and rights, if they were realised in an
enterprise;✘ Prizes in lotteries and pools.
Generally, expenses related to the earning of income, i.e. costs necessary to earn this income(e.g. professional expenses), are deductible from gross income. In addition, so-called generaldeductions are granted for insurance contributions, premiums and contributions to old age,company or individual pension schemes, for double-income married couples etc. as well as forsocial deductions for children and dependants.
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Federal Taxation: Taxes on income
Rates at which Direct Federal Tax is levied on individuals are progressive.
Married couples in a joint household and one parent families benefit from a more favourablerate than other taxpayers (“double schedule” system).
Rates determine directly the tax assessment; no annual multiple is adopted.
The highest Federal rate is 11.5%.
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Federal Taxation: Swiss Withholding Tax
Withholding Tax is an anticipatory tax levied on income derived from movable property(especially on interest and dividends), on prizes from lotteries (35%) and on insurancepayments (8% or 15%). The general rate is 35%.
It is the debtor who is liable for the tax; consequently, he has to deduct 35% from theamount due to the recipient. In cases where the recipient is a Swiss resident and thebeneficial owner of the income, he is entitled to a refund of the tax withheld, if he properlydeclares income and capital for the purposes of direct taxation. The aim of this concept isto combat tax evasion.
For non-resident taxpayers the withholding tax represents a final tax burden. Partial or totalrefund may be granted according to double tax Treaties entered into by Switzerland.
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Cantonal & Communal Taxation: Taxes on income
All Cantons and municipalities apply a system consisting of a general income tax and asupplementary net wealth tax. Cantonal income tax legislation follows the Federal DirectTax in structure. Taxes are assessed generally for a period of one year on the basis of a taxreturn to be filed by the taxpayer. All the Cantons tax the total income; therefore any item of income has to be declared, be itincome from dependent or independent personal activities, income from compensatory orsubsidiary payments as well as income from movable or immovable property. Expenses necessarily incurred to earn the income are deductible from the gross income. Additional deductions may be claimed for children, dependents and insurance premiums,as well as by married and double income couples. In Ticino the highest rate is 15,076%.
Communes are entitled to levy taxes only if authorised by cantons (delegated fiscalsovereignty). Communal taxes are in most cases levied as a percentage or multiple of thebasic cantonal tax rate; alternatively, they may share in cantonal tax revenues.
In some cantons, communes levy taxes based on communal provisions, in other cantonsbased on cantonal law. In Ticino Communal multipliers vary between 53% to 100% (updated@2014)
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Cantonal & Communal Taxation: Resident Individuals
All persons who are gainfully employed and domiciled in Switzerland, and who hold a residence typeB permit issued by the Aliens’ Registration Office, are subject to unlimited tax liability.
Salary is subject to withholding tax assessed on gross income, including subsidiary income andallowances in kind and substitute income (subsistence allowances from health, accident orunemployment insurance, etc.).
The withholding tax is a final tax burden only in case overall income is lower than CHF 120,000. Subsequent assessment (Filing Tax Return at different rates) applies in case taxable income is over
CHF 120,000. If this is the case, taxes deducted at source are credited thereto. Individual income taxis generally assessed annually on the basis of the actual earned income (cash method).
Taxes are collected annually by the cantonal tax office, also on behalf of the Confederation and underthe latter’s supervision.
Depending on whether additional deductible expenses have been sustained or not (mainly,interests onmortage loans or contribution to the volunteer third pillar retirement plan), subsequent assessment mayresult in a balance to be paid or even in a tax credit to be reimbursed.
< CHF. 120’000 FINAL WHTSALARY
> CHF. 120’000 WHT ON ACCOUNT TAX RETURN
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Cantonal & Communal Taxation: Resident Individuals
As far as the taxation of couples is concerned, the Swiss tax system is based on theprinciple of family taxation: income of both spouses in a joint household is aggregated andas a rule the income of underage children is also added to the income of the person whoexercises parental authority.
Expenses incurred in the course of earning income are deductible from the gross income(e.g. professional expenses or general costs).
In addition, general deductions (insurance contributions, premiums and contributions toAHV/IV/EO, contributions to company and individual pension schemes, private debt interest,double earner deductions etc.) as well as social deductions (personal deduction, deductionfor married persons, single-parent families, children, dependants etc.) may be claimed. Theamount of these deductions varies considerably from one canton to another.
Income tax rates are progressive in all cantons; that is, the tax rate rises as incomeincreases until a certain ceiling is reached. The intensity and impact of the progressivenessof rates vary from canton to canton.
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other Cantonal & Communal relevant taxes: Net Wealth Taxation
In contrast to the Confederation, all cantons and communes levy a tax on assets ofindividuals. In general, tax is applied to total net assets and rights of the individual havinga cash value.This includes all of the assets and rights which the taxpayer owns or enjoys. Gross taxablebasis is market value.Taxable property includes movables (e.g. securities, bank deposits, automobiles) andimmovables, redeemable life and annuity insurances, as well as assets invested in abusiness.
The basis of assessment is the net assets value, i.e. gross value after deduction of totalproved debt. In addition, certain deductions (social deductions) which vary from canton tocanton are allowed.In Canton Ticino, first CHF. 200’000 of net assets value are exempted from taxation.
Rates of net wealth tax are progressive (Canton Ticino):0,2%: assets with NET value up between CHF. 200’000 – 280’0000.25%: assets with NET value up between CHF. 280’000 – 700’0000.3%: assets with NET value up between CHF. 700’000 – 1’400’0000.325%: assets with NET value up between CHF. 1’400’000 – 2’800’0000.35%: assets with NET value up between CHF. 2’800’000 – onward.
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other Cantonal & Communal relevant taxes: Imm. Prop. Gains tax
All cantons tax property gains deriving from the sale of the taxpayer’s property.
Roughly half of all the cantons subject property gains to a special tax, the so-calledimmovable property gains tax. This is an exclusive & substitute tax which meansthat gains are only covered by this tax and are not liable for any further taxation.
Profits from taxpayers’ immovable private assets are not taxed by the Confederation(Federal Taxes).
In Canton Ticino rates vary depending how long the property has been owned. Thehighest rate is 30% for property owned for less than 1 year; the lowest is 4% forproperty owned for more than 30 years.
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Other Cantonal & Communal relevant taxes: real estate tax
In approximately half of the cantons, property is subject not only to the wealth or capital taxbut also to a property tax levied periodically (yearly), which is also known as a land orimmovable property tax.
Property tax is primarily a communal tax. When it is cantonal (such as in Ticino), thecommunes usually receive a percentage of the revenue.
Immovable property tax is levied at the place where the property is situated, withoutconsideration as to the domicile of the taxpayer.
For calculation of the tax, non-farm properties usually measure their market value, whereasfarm and forestry properties measure their earning power. The tax is assessed on the full(gross) value of the property without allowing deduction of debts.
Tax is always proportional: tax rate is expressed in units of thousands and variesbetween 0.3 ‰ and 4.0‰ of the market value or earning power.
In Canton Ticino the rate is 1.0‰.
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other Cantonal & Communal relevant taxes: Gains from sale of movable assets
Gains deriving from the sale of movable private assets such as securities, paintings etc. arefree from Direct Federal Tax as well as from tax in all Cantons & Communes, unless realizedin the course of a professional activity.
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Contact Person:
Uberto Meraviglia [email protected]
TALENTURE S.A. PALAZZO GARGANTINI RIVA ALBERTOLLI 1
6900 LUGANOTEL. +41+91+9126480FAX +41+91+9225601