+44 203 621 9930Before relocating it is important to research the finance and tax in Switzerland. For example what taxes are levied where and how much should you be paying?
If you are moving to Switzerland, then your primary concern is probably finding work and working out where to live.
Your decision to move will involve lots of practicalities and legalities, and you will need to carry out research.
One area that you need to pay particular attention to is finance and tax in Switzerland and how it applies to you.
Researching this information before a move should make life much easier.
If you can get most of the administration done beforehand, there will be less to do when you arrive in your new home.
Then all you need to worry about is finding your way around and settling into life. It’s much better to have time to get out and about exploring rather than sitting at home stressing over which forms to fill in.
In this article, we examine the various forms of finance and tax in Switzerland to help you get acquainted with the core facts.
Tax obligations when moving to a new country
Pretty much every country has a myriad of tax regulations to observe.
The big ones are of course income tax, corporation tax, VAT and social security contributions.
Although these exist in one form or another across Europe, there are variations. In some countries, you only pay income tax to a national authority. Much of the guidance, particularly around social security contributions, is set by the EU. Of course not being a member this doesn’t apply to Switzerland.
The regulations on finance and tax in Switzerland though mean that as well as paying federal income tax, it also has to be paid at a cantonal (regional) and municipal level.
Now while we can’t advise you individually on what applies to you, we can offer you an overview.
First of all, you need to ensure that your affairs in your current country are in hand. If you have worked for part of the tax period, you will need to submit a tax return. If you have been working for an employer for part of the year, you may be entitled to a refund.
Income tax rates in Switzerland
Income tax in Switzerland is applied at a federal, cantonal and municipal level. Where you live will certainly affect how much tax you pay when it comes to cantonal income tax.
There are varying levels of tax for each of the different cantons. The highest cantonal rate in one of the lower rate regions is 17%. If you add this to the maximum federal rate of 11.5% you are looking at paying a tax of no more than 30%.
If you choose to live in a canton with a higher rate, you could be paying cantonal income tax of 30% which when added to the federal rate gives you a higher rate of 41.5%. Generally, income tax in Switzerland doesn’t exceed this though.
“There are various tax deductions available.”
There are various tax deductions available. You can deduct the interest you pay on loans for example.
The way you are taxed depends on your personal circumstances. Married couples are taxed as a couple and benefit from a reduction. Single parent families also pay a lower rate.
Social security contributions in Switzerland
It is compulsory for expats to take out Swiss social insurance. In return for this, you can access the various benefits that the country has to offer. These include healthcare, unemployment benefit, long term sick pay, maternity pay and of course a pension.
As is pretty standard across Europe, the contributions are based on a percentage of your salary with each person being charged individually.
If you are in employment, the employer usually pays half. If you are self-employed, you will need to arrange your own cover.
Again the charges vary from canton to canton so where you live is a factor. Certain benefits are handled by the relevant canton and the rest comes under the remit of the Federal Department of Home Affairs.
When you arrive in Switzerland, you have three months to purchase your social insurance to cover both you and your family.
Corporate tax in Switzerland
Like income tax, corporation tax is dealt with on a federal and cantonal/communal level. The federal CIT rate is 8.5% on profit after tax.
“lowest combined rate being 11.5% and the highest 24.2%”
Each canton has its own tax laws and charges at different rates. This may determine where you decide to base your business as the charges are levied at the location of corporate residence. The range of tax rates is actually wide, ranging with the lowest combined rate being 11.5% and the highest 24.2%.
Resident companies are charged on all of the profits made on income in Switzerland.
Non-resident companies are only taxes on the income made in Switzerland.
VAT in Switzerland
As Switzerland is not part of the European Union, it has complete freedom to set its own VAT rates. This is why you will find it much lower than all EU member states.
The rate of VAT is just 8% which it has been since 2011. There is also a VAT reduced rate of 3.8% for hotel accommodation. However, this is only set until the end of 2017.
A further reduced rate of 2.5% is applied to food and drink, agricultural supplies and some other goods and services. VAT exemptions apply to supplies of goods and service to airlines. The registration threshold is CHF 100,000 and companies that are VAT registered must submit a VAT return.
The registration threshold is CHF 100,000 and companies that are VAT registered must submit a VAT return.
Other Swiss taxes
Most importantly are the differences in federal and cantonal taxes.
When researching what applies where, it is important that you ensure you are researching both.
Some cantons have an inheritance tax and a gift tax whereas some don’t. It is important to know which does what.
You need to ensure that you are abreast of everything that could apply to you. If you are unsure, you are advised to seek the advice of an experienced accountant. This will ensure that you have everything in order, extremely important when you are starting life in a new country.
