Switzerland tax rates
Switzerland is a federal republic, officially known as the Swiss Confederation, and is divided into administrative areas known as cantons. Taxes are levied by the individual cantons as well as the government. Municipalities can also levy taxes, often referred to as a communal tax. Since the 1990 Federal Tax Harmonisation Law, cantons can set their tax rates or establish new taxes – with the exception of taxes set by the state.
Tax is deducted at source – this means it is deducted by the employer. This is inclusive of all taxes – federal, cantonal and communal taxes. It is calculated on the basis of the gross income achieved by the individual.
Swiss citizens and foreign employees who have a residence permit must file a tax return each year. Foreign employees who do not hold a permit, but who are in employment are subject to a process known as ‘withholding tax’ and is deducted from monthly salaries by the employer. If you are married to a spouse who holds Swiss citizenship, or a residence permit, then you are exempt from the withholding tax.
Tax brackets in Switzerland
Confusingly, for a lot of people who are not used to the Swiss system, there is not a singular tax bracket system that is applicable to everyone in the country and is subject to huge variants which are dependent upon a number of factors.
Tax at source (or withholding) rates are based on the average rate of so-called ‘ordinary’ taxes by each individual canton. This can be affected by different circumstances, including marital status, the number of children you have, and general deductions. Each circumstance will present its own individual tax rate, making the Swiss system particularly complex, especially when you also consider there is a federal and communal tax rate which is also applied. In the instance of the chart below as an example, we shall focus on a populous area (Zurich) for a single person.
Income tax on single persons and couples can vary widely and is dependent upon which canton one lives in. In Basel-Stadt for example, there is no tax on anyone earning below 20,000 CHF, but taxes become significantly higher the more an individual earns.
Tax rates for married couples or a Swiss-registered partnership is calculated by the combined income of the two people in the relationship, which is then divided by 50 per cent - known as ‘splitting’.
The tax rate applied to single, widowed, divorced or separated individuals with whom a dependent is living (a dependent can be either a child or an adult) is the rate applicable to 50 per cent of their income.
Please remember: If you fall within the withholding tax bracket, it depends entirely on which canton you live in as to how much is withheld.
It is important to note that the communal tax can range widely depending on the area. For example, the communal tax of Geneva is 45.5 per cent of basic cantonal tax. The highest taxes in Switzerland levied at communal level can be found in Chancy and Avully and is 51 per cent of basic cantonal tax. However, the municipality of Genthod is 25 per cent.
If you are unsure about how much tax you will be paying, you can find a state-run online tax calculator here.
Switzerland tax rates vs US tax rates
Just like in Switzerland, taxes in the United States are levied at both state and federal levels – which sees large differences in income tax paid in different parts of the country. Federal income tax rates range between 10 per cent and 40 per cent and depending what state you live in you can pay an additional state income tax ranging from 0 per cent (no tax) or at the highest end 13.3 per cent (in California). So, there are clear parallels between the two countries. US States are like that of the cantons in Switzerland and both produce systems concurrent, but also separate to, federal levels.