Switzerland remains high atop the list of preferred tax havens due to its low taxation of foreign corporations and individuals. All the tax-resident individuals living in Switzerland are liable for the taxation of their worldwide income and assets. Non-tax-resident individuals are only taxed on Swiss sources of income and wealth. This has made company registration in Switzerland a lucrative option for foreign investors and entrepreneurs.
A 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. A person will also be considered resident for tax purposes if they remain in the country for a protracted period, typically more than 90 days (30 days if working), even if they are not engaged in the gainful activity. Companies are considered resident when either their registered office or their actual administration is in Switzerland.
Types of Taxes in Switzerland
Taxes in Switzerland are levied by the Swiss Confederation, the 26 cantons, and approximately 2,300 municipalities. To understand the Swiss tax system, it is important to understand that there are different tax levels. There are only a few types of Swiss taxes for which the confederation claims exclusive tax authority, they are:
- Stamp Duty
- Withholding Tax
- Customs Duty
- Special Consumption Taxes
1. Swiss Corporate Tax
Switzerland has a classical corporate tax system in which a corporation and its owners or shareholders are taxed individually, causing economic double taxation. All legal persons are subject to the taxation of their profit and capital, with the exception of charitable organizations. Any company with a registered office or administration in Switzerland is liable for unlimited Swiss tax, while foreign companies are liable for limited taxation if they hold real estate or a permanent establishment in Switzerland.
2. Swiss Income Tax
Income Tax in Switzerland is levied at federal, cantonal, and municipal level. Resident individuals of Switzerland are taxed on their worldwide income, regardless of the source of the income. The total Switzerland tax rate for personal income doesn’t exceed 40%.
3. Capital Gains Tax
Capital Gains of Swiss residents are exempt from tax, provided these were obtained by selling private movable assets which aren’t assets of a company. However, the cantons do levy a capital gains tax on immovable property; the seller pays capital gains tax on the realized capital gains. There’s no capital gains tax on payable if the property is transferred by the virtue of gold or legacy.
How to File Tax Return as an Expat?
Swiss citizens, foreigners with a permanent residence permit C, or foreigners married to a Swiss citizen, don’t have their taxes deducted from the salary, they need to file a tax return each year. An annual tax return is also due if you are working as a self-employed person or as an employee of a foreign employer. If the taxpayer fails to file their tax return on time, they may be subject to default taxation. In such a case, the tax authorities will assess the taxpayer on the basis of a reasonable estimate. This tax base would usually be substantially higher than the actual tax base and is likely to be more expensive for the taxpayer. No appeal is available if action is not taken within 20 or 30 days (depending on the canton) of the issue of this final assessment. Penalties for non-filing may also be issued.
If you want to avail taxation services in Switzerland, we at Business Setup Worldwide can get it done for you. Our advisors are well versed with the taxation framework and keep themselves updated with every reform. Contact us today to file your tax return in Switzerland.