Taxation of individuals

All tax-resident individuals are taxed on their worldwide income and wealth. Non-tax-resident individuals are only taxed on Swiss sources of income and wealth.

Income taxes are levied at three different levels: at the federal level (which is the same all over Switzerland), at the cantonal level (which is the same within a certain canton and is based on the canton's own tax law and tax rates), and at the municipal level (municipalities follow the cantonal tax law, but are entitled to set their own communal tax rate within certain parameters). Income tax rates are progressive at the federal level and in most of the cantons. Some cantons have recently introduced flat rate taxation. Rates vary from zero to 13%.

All income is taxed on the basis of the same tax return with generally the same tax rate (i.e. all income sources are added together), and from such total income all applicable deductions are subtracted. This results in an applicable tax rate that is levied on all taxable income. Based on applicable DTTs, the actual taxable income in Switzerland may differ from the tax rate determining income. Furthermore, dividend income from substantial participations may be taxed at a lower tax rate based on domestic federal and cantonal law.

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Social Contribution

If an individual is subject to the Swiss social security, the following social security contributions are payable (as of 1 January 2024):

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Insurance                                    Contribution Rate                      Cap (CHF)

                                                Employer      Employee

Old age, survivors’

and disability insurance                5.3                 5.3                          No cap                                

Unemployment Insurance            1.1                  1.1                          148,200                                 

Family Compensation

Fund                                              1-3                   0                           No cap

 

Occupational accident

insurance                                    0.17 to 3             0                          148,200

 

Non-occupational accident

insurance                                        0                  1 to 4                      148,200

 

Occupational pension

scheme                                  Depending on     Depending on

                                                pension plan      pension plan

                                                

Medical insurance                                             Depending on

                                                                           coverage,

                                                                           private insurance 

 

All social security taxes (except for the medical insurance) are the employer’s responsibility. The employer must withhold and remit the total deduction and deducts the employee’s share from his gross pay. If the individual is self-employed, they basically have to cover the employer’s and the employee’s share, however different contribution rates may be applicable.

Taxation of legal persons

Resident companies are subject to Swiss corporate income tax (CIT) on their taxable profits generated in Switzerland. CIT is levied at the federal, cantonal, and communal levels. Foreign-source income attributable to foreign permanent establishments (PEs) or real estate property located abroad is excluded from the Swiss tax base and only taken into account for rate progression purposes in the cantons that apply progressive tax rates.

Non-resident companies may be subject to Swiss CIT if they (alternatively) have a PE in Switzerland, own real estate property in Switzerland, are partners of a Swiss business, have loan receivables secured by a mortgage on Swiss real estate property, or deal with or act as a broker of Swiss real estate property. Non-resident companies are taxed on their income generated in Switzerland.

Federal level

Switzerland levies a direct federal CIT at a flat rate of 8.5% on profit after tax. Accordingly, CIT is deductible for tax purposes and reduces the applicable tax base (i.e. taxable income), resulting in a direct federal CIT rate on profit before tax of approximately 7.83%. At the federal level, no corporate capital tax is levied.

Cantonal/communal levels

In addition to the direct federal CIT, each canton has its own tax law and levies cantonal and communal corporate income and capital taxes at different rates. Therefore, the tax burden of income (and capital) varies from canton to canton. Some cantonal and communal taxes are imposed at progressive rates.

Overall tax rates

As a general rule, the overall approximate range of the maximum CIT rate on profit before tax for federal, cantonal, and communal taxes is between 11.9% and 21.0%, depending on the company’s location of corporate residence at a specific capital of a canton in Switzerland. With the entry into effect of the Federal Act on Tax Reform and AHV (old-age and survivors' insurance) Financing (TRAF) as of 1 January 2020, the cantons introduced internationally accepted measures, such as an Organisation for Economic Co-operation and Development (OECD) compliant patent box, a research and development (R&D) super deduction, and other measures. These measures can lead to lower effective tax rates.

 
Value Added Tax

As a matter of principle, proceeds of sales made and services provided in Switzerland are subject to VAT at the standard rate of 8.1% (7.7% until 31 December 2023) . Goods for basic needs are subject to VAT at the reduced rate of 2.6% (2.5% until 31 December 2023). Furthermore, services in connection with the provision of lodging (accommodation) are subject to VAT at the special rate of 3.8% (3.7% until 31 December 2023).

Any person, regardless of legal form, objects, and intention to make a profit, is liable to VAT if that person carries on a business and is not exempt from the tax liability. A person carries on a business if the person independently performs a professional or commercial activity with the aim of sustainably earning income from supplies and acts externally under the person's own name. Taxable persons must register with the Swiss Federal Tax Administration of their own accord in writing within certain deadlines. A registered taxpayer generally is entitled to offset the amount of VAT charged by suppliers or paid on imports against the VAT payable.

The tax liability of foreign companies that supply goods to Switzerland is calculated on their worldwide turnover. Accordingly, if a company generates less than 100,000 Swiss francs (CHF) from the supply of goods to Switzerland, but at least CHF 100,000 in turnover globally, it is liable for VAT in Switzerland from its first Swiss franc of turnover.

Since 1 January 2019, foreign-based mail-order companies are liable for VAT in Switzerland if they generate at least CHF 100,000 annual turnover from small consignments to Switzerland. Such foreign-based mail-order companies are equated with the Swiss companies for VAT purposes.

The VAT rates are dependent on the goods sold or the services provided. Some supplies are exempt from tax without credit (e.g. hospital treatment, cultural services, insurance and reinsurance turnovers, specific turnovers in the field of money and capital transactions), and some supplies are fully exempt from tax (e.g. supply of goods that are transported or dispatched directly abroad). The difference relates to the fact that input VAT related to supplies exempt from tax without credit cannot be deducted, whereas supplies exempt from tax are fully eligible for input VAT deduction.