Europe’s lowest overall tax rates

Switzerland's tax system is extremely attractive. Stable political conditions, a liberal legal framework and tax competition between cantons and municipalities result in a permanently low tax burden. The Swiss tax system is shaped in accordance with the federal structure of the country. Corporations and natural persons (individuals) are taxed on three different levels:

	Nation (direct federal tax)
	Canton (cantonal tax)
	Municipality (municipal tax)

FTA – Swiss Federal Tax Administration

Corporate taxes

Companies are taxed at their place of value creation, i.e. where the company is based or where it carries out its business activities. The most important corporate taxes are levied on income (profit) and capital. At federal level, profit is taxed at a flat rate of 8.5%, (i.e. after taxes at an effective rate of 7.83%). At cantonal level, income tax is calculated progressively, effective tax rates vary depending on municipality. General rule of thumb: the higher the return (i.e. the annual profit/capital rate) of a company, the higher the level of taxation. Capital tax is only levied by cantons and municipalities. Capital tax rate is between 0.075-0.7%.

Corporate tax burden in the Greater Zurich Area is among the lightest in the world; tax rates are between 15-25% (all of Switzerland 12-26%). A careful selection and design of company structures can minimize the effective tax rate in the Greater Zurich Area to below 8%.

Cost Benefit: Favorable Corporate Taxes
Cost Benefit: Tax Privileges for Corporations

Individual taxes

Individuals are taxed at their place of residence. The most important individual taxes are levied on income and private assets. Income tax is levied on both income from work (wage) and income from personal assets (interest, dividend). Cantonal income tax varies depending on the municipality. Like federal income tax it is calculated progressively, i.e. the tax rate increases commensurate with personal income gains. Married couples jointly pay taxes on their combined income and enjoy a lower tax rate than non-married couples with similar incomes. Income tax rates in the Greater Zurich Area are between 5-25%.

Tax on personal assets is only levied by cantons and municipalities. In the Greater Zurich Area tax rates on personal assets are between 0-0.9%. In some cantons of the Greater Zurich Area small personal assets are tax-exempt.

Cost Benefit: Favorable Individual Taxes

Withholding tax and double taxation

Income of foreign nationals residing in Switzerland without residence permit type «C» is subject to withholding tax. Withholding tax rates are contingent on gross wage (regular deductions included). Tax levy and collection are handled by the employer and the cantonal tax authorities. Payments are automatically withheld from the employees wages on a monthly basis. If the annual gross income exceeds CHF 120'000 it will be subject to the regular Swiss tax declaration (i.e. individual completion of an annual tax statement with the right to deduction of certain individual costs and expenses).

In order to avoid international double taxation, Switzerland has signed comprehensive double taxation agreements with over 100 countries. 

FTA – Swiss Federal Tax Administration

Lowest VAT (sales tax) in Europe

Switzerland has by far the lowest value added tax (VAT) anywhere in Europe. Regular VAT: 8%. Hotels: 3.8%. Necessities/convenience goods: 2.5%. Medical care and education: 0%.

Moderate additional taxes

Inheritance tax In most cantons, immediate descendants are exempted from inheritance taxes. The inheritance and capital transfer tax rates for third parties range between 10-50% in the various cantons.

Real estate profit tax Capital gains deriving from a sale of property are being taxed at rates between 0.3-3‰ depending on time of ownership.

Real estate transfer tax In a few cantons, the transfer of rights when buying a property will be taxed. Tax rates are between 1-3% of the purchase price.

Motor vehicle tax Taxes for motor vehicles vary from canton to canton and range between CHF 200-2'500 per year depend on the engine power of the vehicle.

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