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Executive contacts
Hugh Docherty
Lukas Naef
Markus Kaempf
Immigration contact
Jan Wong
A. Income tax
+41 (58) 286-43-42
Email: hugh.docherty@ch.ey.com
+41 (58) 286-41 27
Email: lukas.naef@ch.ey.com
+41 (58) 286-44-06
Email: markus.kaempf@ch.ey.com
+41 (58) 286-30-80
Email: jan.wong@ch.ey.com
Tax system in summary. Switzerland’s tax structure has been shaped by the country’s three levels of government, which are federal, cantonal and municipal. The following two distinct taxes are levied:
• Federal taxes
• Cantonal and municipal taxes
Swiss federal tax law is uniform throughout Switzerland, but each of the 26 cantons has a separate law for cantonal taxes. Municipal taxes are levied as a multiple of cantonal taxes. Because tax laws and tax rates vary widely among cantons and among municipalities, the choice of residence is an important element of tax planning.
No average tax rates can be calculated because of the multilayered tax system. Taxes are calculated based on specific figures for specific cantons and municipalities. The maximum overall rate of federal income tax is 11.5%. The various cantonal and municipal taxes are also levied at progressive rates, with a maximum combined cantonal and municipal rate between 8.05% and 33.63%. In addition, cantonal and municipal net wealth taxes are levied.
The federal Supreme Court and tax administration have developed rules for allocating tax liability among the cantons to avoid double taxation.
Federal taxable income. Individuals establishing tax residence in Switzerland are assessed for federal income tax purposes on a current-year basis.
The basis of assessment may be altered if certain events change an individual’s financial and/or personal situation (for example, level of income and/or assets, marriage, divorce or legal separation).
In general, taxable income for federal tax purposes consists of all types of income earned by a resident individual, including the following (list is not exhaustive):
• Remuneration from an employer (for example. base salary, bonus, stock options, restricted stocks, restricted stock units, crypto currencies, home leave, payment of rent, taxes, school fees and utilities)
• Self-employment or business income
• Pension payments and compensation for loss of work or health
• Income from private investments (including interest and dividends)
• Income from real estate
• Alimony payments
Although income derived from either a fixed place of business or a permanent establishment located abroad, as well as income derived from real estate located abroad, are exempt from taxation, this income must be properly recorded on a Swiss tax return for the determination of the tax rate (exemption with progression).
Cantonal and municipal taxable income. At the cantonal level, tax is also assessed on a current-year basis. Taxable income for cantonal and municipal tax purposes is calculated in basically the same way as taxable income for federal taxes.
Who is liable. An individual who is tax resident in Switzerland is subject to federal, cantonal and municipal taxes on worldwide income, except income derived from real estate located abroad and income from either a fixed place of business or a permanent establishment located abroad. Individuals are subject to Swiss income tax and net wealth tax (see Section B) from their first day of residency until they officially leave the country.
Nonresidents are subject to tax on income from the following Swiss sources:
• Rental income from Swiss real estate
• Interest in a Swiss partnership or sole proprietorship
• Trade or business attributable to a Swiss permanent establishment or fixed place of business
some cantons levy a separate tax on gains from sales or exchanges of immovable assets.
Deductions
Deductible expenses. Necessary expenses incurred in connection with employment income, maintenance and operating costs of real estate, any kind of debt interest, contributions to qualified pension plans, Swiss or foreign compulsory social security premiums, and other specific items are deductible from taxable income. For some expenses, tax-deductible amounts are standardized (insurance premiums, education costs and lunch expenses). These rules apply for federal as well as cantonal and municipal taxes. However, other items may be treated differently among the cantons.
For expatriates (as defined), an annual deduction of CHF18,000 is allowed, which is intended to cover an expatriate’s housing and other expenses related to being an expatriate. Expenses more than CHF18,000 may be deductible if they can be proven. Other typical expenses of an expatriate, including moving expenses, may also be deductible.
Personal deductions and allowances No specific personal deductions and allowances are granted to individual taxpayers, except some minor standardized deductions granted in most cantons (for example, deductions for children).
Business deductions Nonresidents may deduct necessary expenses incurred in operating a business or profession and in the maintenance and operation of rental property.
Lump-sum taxation. Resident aliens who were resident or domiciled abroad for the past 10 years may qualify for a special tax concession called lump-sum taxation if they do not engage in any employment or carry on a business in Switzerland. Activities outside Switzerland are not taken into consideration. The lump-sum tax is imposed on income imputed from the living expenses of taxpayers and their families (for example, by a multiple of rental value). The amount of lump-sum tax may not be less than the tax that would be payable on the sum of the following items:
• Income from Swiss real property
• Income from Swiss investments
• Income from any other property located in Switzerland
• Income from Swiss-source patents, copyrights and similar property rights
• Pensions or annuities paid from Swiss sources
• Foreign income, if treaty exemption is claimed
Several cantons allow a nonworking resident to elect lump-sum taxation instead of regular income tax.
In certain cantons, lump-sum taxation is granted for only a limited number of years. In many cantons, eligibility for lump-sum taxation and the method of calculating the tax payable are negotiated individually with the tax authorities rather than statutorily determined.
Rates. The maximum overall federal tax rate is 11.5%.
Cantonal tax rates vary considerably from one canton to another, although all rates are progressive. The tax rate consists of a base
rate multiplied by a coefficient, which may change from year to year. The municipal tax rate is usually a percentage of the cantonal rate. Therefore, the overall rate varies within a canton, depending on the municipality where a taxpayer resides. In most cantons, a church tax is also levied as a percentage of the cantonal rate for taxpayers who are members of an official Swiss church community. Maximum cantonal and municipal tax rates range from approximately 8% to 34%.
B. Other taxes
Net wealth tax. No net wealth tax is imposed at the federal level. All cantons and municipalities levy net wealth tax on worldwide assets, except for real estate, a fixed place of business, or a permanent establishment located abroad. Tax rates are reasonably low and vary widely, depending on the canton and municipality where the taxpayer resides. Maximum cantonal and municipal wealth tax rates range from approximately 0.10% to 0.88%.
Church tax. Church tax is levied on individuals who are members of recognized religious communities, such as the Roman Catholic and Protestant churches, and is collected by cantonal tax authorities as a percentage of income tax; however, it is not imposed in all cantons. The rates and regulations vary by canton, and individuals can opt out by formally resigning from their religious community. Revenue from the church tax funds religious activities, community services and social programs.
Inheritance and gift taxes. No inheritance or gift taxes are imposed at the federal level. However, all cantons levy separate inheritance and gift taxes. Rates vary widely depending on the canton where the deceased or donor is domiciled. Inheritances and gifts to spouses and registered partners, as well as to direct descendants, such as children and grandchildren, are generally tax-free.
In most cantons, residents are subject to inheritance tax and gift tax on worldwide assets, except for real estate located abroad. Nonresidents are subject to inheritance tax and to gift tax on real estate located in Switzerland only.
Treaties. To prevent double taxation, Switzerland has entered into inheritance tax treaties with the following jurisdictions.
Austria Liechtenstein Netherlands
Denmark (including (only with Sweden Faroe Islands) limited United Finland Swiss Kingdom
Germany cantons’ United States
Israel (only with declaration of Basel Stadt canton; reciprocity) declaration of reciprocity)
C. Social security
Swiss retirement benefits are derived from the following sources:
• The mandatory social security system (old-age and survivors’ insurance). Pensions are based on premiums paid and on the number of years worked. Benefits generally satisfy minimum living requirements.
estate located abroad. In addition, certain types of income, including directors’ fees, special pensions and partnership profits, may be exempt in Switzerland under an applicable treaty.
In general, all other foreign-source income is taxable in Switzerland. In the absence of a treaty, foreign-source income on movable assets (for example, dividends on foreign shares) may be taxed net of any foreign income taxes or withholding taxes imposed on such income by the source country, depending on the circumstances.
Most of Switzerland’s income tax treaties follow the draft model of the OECD. Switzerland generally applies the exemptionwith-progression method rather than the tax-credit method for qualified foreign-source income. However, a limited tax credit is granted, for remaining net foreign withholding taxes imposed on dividends, interest and royalties from the treaty jurisdictions listed below. The credit may not exceed Swiss tax due on the relevant income.
Switzerland has entered into double tax treaties with the following jurisdictions.
Albania Hungary Philippines
Algeria Iceland Poland
Argentina
Armenia
Australia
India
Portugal
Indonesia Qatar
Iran
Romania
Austria Ireland Russian
Azerbaijan
Bahrain
Israel Federation
Italy Saudi Arabia
Bangladesh Jamaica Serbia
Barbados
Japan Singapore
Belarus Kazakhstan Slovak Republic
Belgium Korea (South)
Brazil
Slovenia
Kosovo South Africa
Bulgaria Kuwait Spain
Canada Kyrgyzstan
Sri Lanka
Chile Latvia Sweden
China Mainland Liechtenstein Tajikistan
Colombia Lithuania Thailand
Côte d’Ivoire
Luxembourg Trinidad
Croatia Malawi and Tobago
Cyprus Malaysia Tunisia
Czech Republic Malta Türkiye
Denmark Mexico Turkmenistan
Ecuador Moldova Ukraine
Egypt Mongolia United Arab
Estonia Montenegro Emirates
Ethiopia Morocco United
Faroe Islands
Netherlands Kingdom
Finland New Zealand
France
Georgia
North Macedonia
United States
Uruguay
Norway Uzbekistan
Germany Oman Venezuela
Ghana
Greece
Hong Kong SAR
Pakistan Vietnam
Peru
Zambia
On 29 July 2021, Switzerland signed a double tax treaty with Ethiopia, which is not yet in effect.
F. Telework agreements and cross-border agreements
Income tax. On 22 December 2022, Switzerland and France reached a tax agreement allowing cross-border workers to telework up to 40% of their workload from France without impacting their personal taxation.
This means that cross-border workers can telework up to 40% from France without tax implication. It should be noted that the 40% rate includes temporary assignments (business trips) carried out in France or in a third country. These missions must not exceed 10 days per calendar year. As a result, cross-border workers need to respect the following double limitation on a yearly basis:
• Telework (including business trips) up to 40%
• Maximum of 10 business days in France or abroad
An agreement on the taxation of cross-border commuters and a protocol of amendment to the double taxation agreement between Switzerland and Italy entered into force on 17 July 2023. The new provisions apply from 1 January 2024. With the new agreement, Switzerland will retain 80% of the regular withholding tax on the income of cross-border commuters who are new to work in Switzerland. The new cross-border commuters will also be taxed properly in Italy, avoiding double taxation. “New” crossborder commuters are individuals who enter the labor market on or after 17 July 2023.
A transitional arrangement applies to cross-border commuters who work or have worked in the cantons of Graubünden, Ticino or Valais between 31 December 2018 and 17 July 2023. These persons will continue to be taxed exclusively in Switzerland until the end of the 2033 fiscal year, with Switzerland paying financial compensation to the Italian border municipalities corresponding to 40% of the tax at the source collected.
On 16 October 2024, the Swiss Federal Council set 1 January 2025 as the effective date for the federal law on taxing telework in an international context.
This is closing the process that started in March 2024 when the Swiss tax law amendments were proposed and became open for consultation.
The purpose is to create the legal basis for the following:
• Taxation of teleworking performed abroad with certain limitations (that is, only applicable for neighboring countries and if foreseen by the tax treaties)
• Obligation on companies to issue an attestation to employees leaving the company during the year with all relevant information to determine their status as a cross-border employee
• Obligation on companies to report the relevant information under the automatic exchange of information introduced in the tax treaties with France and Italy
Also, the Federal Department of Finance has amended its ordinance on tax at source taxation (“OIS” of 11 April 2018) with the introduction of Article 5a to include the obligation for companies
H. Work permits and work authorizations
General principles. Any foreigner who wants to perform a gainful (productive) activity in Switzerland must, in principle, be in possession of a work authorization. Any activity (self-employed or employed status) that normally procures a gain is a gainful activity, even if the activity is performed for free or if the remuneration consists only of coverage of basic expenses.
Switzerland has the following dual system for the admission of foreign workers:
• The provisions of the AFMP and its directives for European Economic Area (EEA) citizens locally employed in Switzerland and for employees in the EEA who work in Switzerland for up to 90 days per calendar year (online notification)
• The provisions of the Foreign Nationals and Integration Act (FNIA) and its provisions for non-EEA citizens and EEA citizens seconded to Switzerland
EEA citizens. EEA citizens under local (Swiss) employment contracts benefit from the AFMP and, accordingly, are entitled to obtain a work permit. They may perform a gainful activity in Switzerland as soon as they have registered their residency in Switzerland. In the case of EEA citizens seconded to Switzerland, their employer needs to file a formal work permit application with the authorities because they fall under the Swiss FNIA. Further requirements (quotas and minimum salary requirements) also apply to them (see below). They may only start working after having received the respective approvals from the Swiss immigration authorities.
As of 1 June 2019, the Swiss Federal Council has granted the full unrestricted free movement rights to Bulgarian and Romanian nationals and therefore abolished the quotas that were in force until May 2019.
On 22 November 2023, the Swiss Federal Council extended the safeguard clause for Croatian nationals until 31 December 2024. As of 1 January 2025, Croatian nationals again benefit from the unrestricted freedom of movement.
The Swiss Federal Council will review the numbers of permits issued to Croatian nationals near the end of 2025 and announce if the safeguard clause will be reintroduced in 2026 (and if so, they will announce the new quota numbers for B and L permits; see Section I). As of 2027, there is no legal basis for the Swiss Federal Council to maintain the safeguard clause, and it will be required to reinstate unrestricted access of Croatian nationals to Switzerland.
United Kingdom citizens. On 31 January 2020 the United Kingdom withdrew from the EU. In the withdrawal agreement between the EU and the United Kingdom, a transitional phase lasting until 31 December 2020 has been agreed on. From 1 January 2021, the AFMP between Switzerland and the EU no longer applies to the United Kingdom. From this date, UK nationals are no longer EU/EFTA nationals but are considered third-country nationals.
However, authorization is required for the following non-EEA nationals to change employers:
• Individuals who receive work permits for specific time-limited activities or specific projects
• Individuals holding a short-term L permit (see Section I)
Locally employed EEA nationals holding long-term B permits can freely change from a dependent activity to an independent activity.
EEA and non-EEA citizens can in principle move their residence to another canton (a new permit will be issued by the new canton of residence). However, non-EEA citizens are required to request a specific authorization from the cantonal authorities to be allowed to move their residence to another canton.
I. Type of permits
Online announcement. Strictly speaking, the online announcement is not a permit, but still required if employees of EEA- and UK-based entities work in Switzerland for less than 90 days. This also applies for EEA-citizens employed by a Swiss entity for less than 90 days per calendar year. For more information, please see Online announcement under Exceptions in Section G.
Short-term work permits (L permits). Short-term work permits (L permits) are one- to four-month/120-day permits, which do not fall under the Swiss quota system described above. Foreign nationals may take up short-term employment (typically under assignment) for a maximum of four consecutive months, or 120 days, spread throughout a 12-month period.
Typically, one- to four-month/120-day permits are granted to executives or specialists who are needed either once or periodically in Switzerland to perform time-limited tasks. However, Swiss law does not allow a system of rotating employees every four months or 120 days (for example, one employee comes for 120 days and is replaced by another, who is then replaced by another).
The second category of L permits is granted for a period between four months and one year and permits are generally issued for project-related stays or short-term assignments. Such permits are subject to quotas, and registration of residence in Switzerland is required. After one year, the L permit may be extended for another year (24 months maximum in total for non-EEA nationals).
The permit lapses if the permit holder gives notice of departure from Switzerland to the municipality’s local registration office, forfeits his or her residence, or lives abroad for more than three months.
Long-term work permits (B permits). Long-term work permits (B permits) are granted if an employment/assignment contract for an undetermined duration or for a duration greater than 24 months exists. B permits typically have a validity of five years for all EEA nationals and of one year for non-EEA nationals. The B permits are renewable until obtaining the C permit (see below). In the case of seconded EEA or non-EEA nationals, the B permits are subject to quotas and are usually granted for one year