At what income level do expats have to pay taxes in Switzerland?

As is the case with many other things, Switzerland has taken on a unique path in tax matters. In accordance with the federalist concept, not only the federal government but also the cantons and municipalities can levy various taxes in this country. For expats who are not familiar with the Swiss tax system and do not speak any of the national languages, this can be very confusing

What taxes do I have to pay, at what income level is the tax due and how can I reduce the tax burden?

These are just some of the questions expats face in Switzerland. We have compiled the most important answers for you.

Expats Switzerland and taxes at a glance

As a general rule, all expats who earn an income in Switzerland are liable to taxation here. However, whether taxes actually have to be paid depends on the personal circumstances of each employee.

1. Which type of taxation is applicable?

The first question you need to ask yourself as an expat is whether you are subject to ordinary assessment or withholding taxation. Depending on which taxation method applies, the tax liability starts earlier or later.

As a rule, expats in Switzerland are not subject to ordinary assessment, i.e. they do not have to pay the income and wealth tax, but are instead subject to the withholding tax.

Subject to the withholding tax are people who earn an income in Switzerland and who

• are resident in Switzerland for tax purposes but do not hold a permanent residence permit (Permit C); or

• do not have a tax residence in Switzerland (e.g. cross-border commuters, weekly residents, etc.).

For withholding tax purposes, it does not matter what type of income is earned. A construction worker who lives in Constance and works in Thurgau is just as much subject to the withholding tax as the French director of a Swiss company

Find out how the withholding tax works.

2. What is the taxable income?

The withholding tax is based on the gross income from employment of an employee (salary, additional income, employee shareholdings). Furthermore, substitute income for disability, benefits from old-age and survivors' insurance are taxable. In principle, the tax liability exists irrespective of the amount of income.

Example: A monthly income of less than CHF 800 is taxed at 0.25% in the canton of Zurich (tariff A).

3. What does the tax depend on?

Whether or not and on what income expats ultimately have to pay taxes depends not only on the income itself, but on a number of other factors.

Personal situation: As with ordinary taxation, there are different tax rates for the withholding tax. Depending on the expats personal situation, the starting point and scope of tax liability varies. In particular, it is relevant whether the taxpayer is single or married, whether he has children and whether he has to pay church taxes or not. The expats country of origin is relevant as well. For German cross-border commuters, for example, special rates apply.

Example: A single person (tariff A) pays 0.25 percent withholding tax on a gross monthly salary of up to CHF 800. Married single earners (tariff B), on the other hand, already pay 0.5 percent on the same gross salary (< CHF 800). On the other hand, the tax rate for tariff A climbs faster than for tariff B as income increases.

Canton: Each canton has different withholding tax rates. It is therefore of importance in which canton an expat is liable to pay taxes i.e. his canton of residence.

Example: While in the canton of Zurich every income is taxed regardless of the amount, the canton of Bern grants an exemption amount of CHF 1650 (tariff A in each case). Thus, taxation at source only starts from a gross monthly salary of CHF 1651.

Deductions: Like regular tax payers those who are taxed at source are entitled to claim certain deductions that reduce their tax liability. However, unlike in the case of ordinary assessment, the costs (professional costs, insurance premiums & family expenses/double-earner deduction) are not deductible individually, but are taken into account in the form of a lump sum. Given the same salary, the tax liability of someone who is able to claim a lot of deductions starts later than the one of someone who is not entitled to reductions i.e. someone who can claim reductions has to pay less taxes.

Do you need help with your tax return? The taxea specialists are happy to assist you with their comprehensive expertise

Image source: Zurich Tax Office