Swiss taxes for locals and non-residents

Swiss tax is a complex subject, even more so than in many other countries. This complexity arises because Switzerland is a federal republic (or "confederation") where both the cantonal and federal governments have the authority to levy taxes. In fact, cantonal taxes make up the largest portion of the average family's tax bill.

Cantons have broad discretion in setting taxes, including income taxes. The Confederation reserves exclusive authority over a few taxes, such as value-added tax (VAT) at 7.7%, stamp duties (transfer tax), and customs duties. This results in Switzerland effectively having 26 different tax systems, one for each canton. Cantons can vary not only the tax rates but also the thresholds, allowable deductions, and social benefits like pension relief and deductions for children.

In addition to the federal and cantonal taxes, Switzerland’s 2,200 communes and three nationally recognized churches can also impose certain taxes.

Further complicating matters, the taxation of foreign residents in Switzerland depends on factors such as the type of residence permit they hold and whether they are married to a Swiss national. Given this level of complexity, this article can only skim the surface of Switzerland’s tax system — or rather, tax systems!

Family tax

Switzerland taxes families rather than individuals, which includes married partners and any minor children living at home who are earning money. This means one tax return per household.

Residents are subject to unlimited tax liability on their worldwide income, meaning if you live in Switzerland, you’ll pay tax on any investment income earned abroad as well.

Tax on owner occupation vs tax on rental

Switzerland has a unique tax called the Eigenmietwert or valeur locative, which is a tax on the imputed rental value of your home. Tax authorities usually estimate this value at around 70% of the market rent—essentially, the amount you would earn if you rented your home instead of living in it.

The purpose of this tax is to create fairness between homeowners (who can deduct mortgage interest from their taxes) and renters (who don’t have this benefit). However, it makes property ownership less tax-efficient compared to the stock market, where there is no tax on portfolio value or capital gains.

If you rent out a property you own, you’ll be taxed on your actual rental income at your marginal income tax rate. You generally have two deduction options:

1. Deducting the actual costs of maintenance, renovation, insurance, and management.
2. Taking a 10-30% rebate (depending on the canton) on your rental income.

Additionally, mortgage interest is tax-deductible, making property investment more tax-efficient when financed through debt.

Wealth tax

Wealth tax is controlled by the cantonal governments and applies to net wealth (after debts like mortgages are deducted). This tax is imposed on all cash-value assets, excluding ordinary household goods. Thresholds vary between CHF 51,000 and CHF 260,000 depending on the canton, and the tax is typically progressive, meaning rates increase with higher net assets.

Lump sum tax

Switzerland offers a special tax arrangement for wealthy foreigners who don’t work. Known as lump sum tax, this allows foreigners to pay lower taxes based on their living expenses, agreed upon with tax authorities. Typically, you’ll need CHF 10 million in wealth to qualify. The benefit is that there is no investigation into your worldwide assets or income, which remain untaxed. However, some cantons, such as Zurich, Basel Land, and Basel Stadt, have abolished this tax. Despite this, for high-net-worth individuals, Switzerland remains an attractive tax haven due to this provision.

Non-resident taxes

Non-residents have limited tax liability, meaning they are only liable for taxes on Swiss-sourced income. For instance, if you own a flat and rent it out, you will be taxed on that rental income. However, you can offset expenses related to property ownership, such as maintenance, management, insurance, and interest payments on mortgages.

As we've mentioned, Switzerland has 26 different tax regimes, making it difficult to summarize them in a single article. The federal base rate starts at 0.77% for single individuals, and a threshold of CHF 14,000 for single people or CHF 28,300 for married couples is untaxed. The rate progressively rises to a maximum of 11%. However, cantonal and commune taxes are added on top of this federal rate. For example, cantons like Obwalden and Uri have a flat rate tax, such as 1.8% in Obwalden. Other cantons apply progressive tax bands, with marginal rates reaching 48% in Geneva, 41.5% in Lausanne/Vaud, and 41% in Zurich (including state-level taxes).

Different cantons also vary in their treatment of married taxpayers. In Zurich, there are separate tax scales for single and married taxpayers. In Geneva, a splitting procedure is used, where married couples are taxed on 50% of their combined income. Valais offers a tax rebate for couples, and Vaud uses a splitting model that also benefits single-parent families and children.

Tax rates, Vaud canton (Lausanne)

An illustration from Zurich-based law and tax consulting firm MME highlights the tax differences for a single taxpayer and a married couple earning a gross salary of CHF 150,000, depending on where they live. The table below summarizes federal and cantonal taxes, including various tax allowances, particularly for insurance and pension fund contributions.

Double taxation refers to how Swiss taxes interact with the tax systems of other countries, such as when a Swiss resident earns income from abroad or a non-resident earns income in Switzerland. Switzerland has double taxation agreements (DTAs) with over 80 countries, including the UK, US, Canada, most of Europe, China, Russia, India, Argentina, and Mexico. These agreements are designed to prevent individuals and businesses from being taxed on the same income in both countries.

Practicalities

The Swiss tax year runs from January 1st to December 31st. Tax forms typically need to be submitted by the end of March, though some cantons have earlier deadlines, such as March 15th.

And one more thing...

If you have a dog, be aware that you'll need to pay the dog tax, which is levied by your canton or commune.

While most cantons are reasonable, one commune famously ruffled feathers by stating: "Pay the tax, or your mutt gets it in the neck." Thankfully, most areas are a bit more forgiving — though they still expect prompt payment!