Thanks to federalism, the tax burden in Switzerland for a married couple with a taxable income of CHF 100,000 can range from CHF 7,530 to CHF 19,750 depending on where in Switzerland that couple lives.
Tax obligations of foreign individuals
Wage withholding tax
Foreign individuals with employment in Switzerland are generally subject to wage withholding tax, known as "Quellensteuer" in German or "taxation à la source" in French.
The wage withholding tax is levied by the Swiss employer on a monthly basis and includes income tax on federal, cantonal and communal level, as well as possibly also church tax.
Lump sum deductions such as business expenses and social security contributions are included in the applicable wage withholding tax rates.
Additional deductions, such as payments into Pillar 3a private pension funds, can be claimed by making a tariff correction request, which in most cantons must be filed by the end of March of the following calendar year.
Ordinary tax return
If the foreign individual has his/her residence in Switzerland and one of the following three conditions is met, an ordinary tax return has to be filed:
- Receipt of C-permit or marriage with a Swiss national or a person holding C-permit
- The annual gross salary exceeds CHF 120,000 (in Geneva CHF 500,000)
- The individual has further Swiss-sourced income, and/or has wealth taxable in Switzerland (such as real estate in Switzerland)
Any wage withholding tax that has already been levied will be credited against one's final tax liability.
Swiss tax residence
According to Swiss tax law, residence is defined as the place where a person stays with the intention of settling permanently and which therefore provides the centre of his/her personal and business interests.
In addition, a person is also be considered as resident for tax purposes if he/she remains in Switzerland for a protracted period of more than 90 days, or 30 days if working.
Swiss resident individuals are generally subject to income and wealth tax on the basis of their worldwide income and wealth (unlimited tax liability). However, revenues derived from business carried out abroad, from permanent establishments abroad and from real estate located abroad are exempt and are only taken into account for the determination of the applicable tax rate (exemption with progression).
In Switzerland the principle of family taxation applies, i.e. the income and wealth of spouse and dependent children have to be declared in one tax return. There is currently no option for individual filings. The tax return must be filed with the competent cantonal tax authority until March of the following calendar year, however an extension of the filing deadline is usually granted.
Non-resident individuals are only taxed on Swiss sourced income and assets (limited tax liability). Usually no annual tax return has to be filed as only wage withholding tax on the salary income is levied.
For executive employees and technical specialists who are sent by their foreign employer to Switzerland on a temporary assignment (for a maximum period of five years), certain special tax deductions apply.
These so-called "expats" are entitled to deduct additional professional expenses as follows:
- costs for travel to Switzerland and back to home country (at beginning and end of assignment)
- travel expenses to and from Switzerland
- costs for accommodation in Switzerland if the expatriate maintains a permanent habitation abroad
- costs for a private school for children if education in a local language is not feasible
However, these additional tax deductions are only possible if these costs are neither directly paid by the employer nor reimbursed to the employee.
Foreign local hires do not qualify as expats.