Answer ... (a) What taxes are levied and what are the applicable rates?
Individuals are subject to Swiss income tax. Income tax rates are progressive at the federal level and in most cantons. In 2020, federal income tax varied from 0.77% (for individuals) and 1% (for spouses) to a maximum rate of 11.5%.
At the cantonal level, the tax rates vary significantly. For example, the maximum marginal rates – including federal income tax – are approximately:
- 45% in the city of Geneva;
- 40% in the city of Zurich; and
- 22.49% in the city of Zug.
(b) How is the taxable base determined?
Generally, worldwide income is subject to Swiss income tax. The income of the spouse and dependent children is included in a single tax return/assessment. Taxable income in Switzerland comprises the following components, among others:
- employment and self-employment income;
- income from movable assets (eg, interest and dividend income);
- income from immovable property (eg, rental income);
- income from pension schemes and the like; and
- other income not especially excluded by cantonal or federal tax law.
Foreign exempt source income is in principle relevant for the determination of the applicable tax rate/tariff.
(c) What are the relevant tax return requirements?
Tax returns must generally be filed in the canton where the taxpayer is resident at the end of the respective tax period. The official filing dates vary from canton to canton.
Foreign employees without a residence permit are subject to wage source tax. Provided that certain conditions are fulfilled, they must additionally file a subsequent ordinary tax return and declare their worldwide income and wealth.
(d) What exemptions, deductions and other forms of relief are available?
The following items, among others, are deductible from taxable income to a certain extent:
- 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; and
- Swiss or foreign compulsory social security premiums; and
- other specific items.
For some expenses (eg, insurance premiums, education costs), tax-deductible amounts are standardised. These rules apply for federal as well as cantonal and communal taxes.
No specific personal deductions and allowances are granted to individuals, except
some minor standardised deductions granted in most cantons (eg, deductions for children).
To a certain extent, gifts to Swiss tax exempted charitable foundations and associations are deductible for income tax purposes.