Switzerland: Taxes and Costs

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Swiss rental income tax is very high

Effective Tax Rate on Rental Income
Monthly Income	€1,500	€6,000	€12,000
Tax Rate	48.6%	53.2%	54.5%
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INDIVIDUAL TAXATION

Non-residents are taxed on Swiss-sourced income. Taxation occurs at the federal, cantonal and municipal levels. Spouses and minor children are taxed together.

INCOME TAX

Non-residents are liable to tax on income from Swiss sources at the federal, cantonal and municipal level. Different rates apply for married taxpayers (including those widowed, divorced, or single and supporting children or destitute persons) and unmarried taxpayers.

Federal Income Tax

Federal income tax is levied on the income of taxpayers at progressive rates. Taxable income is generally computed as the aggregate of all kinds of income, less allowable deductions.

Cantonal Income Tax

Cantons levy their own tax on income. Just like the federal income tax, the cantonal income tax has progressive rates and is different for married couples and unmarried individuals, but varies from canton to canton.

Municipal Income Tax

Municipalities also levy their own taxes on income. The municipal income taxes are generally similar to the cantonal income tax laws. The local authorities also determine their own coefficient, and they are levied in accordance with the cantonal income taxes.

Rental Income

Rental income in Switzerland is taxable at the federal, cantonal and municipal levels. Administration costs invoiced by third persons, necessary maintenance and improvement costs, as well as interest payments in respect of loans used to acquire income, are deductible from the taxable amount. The rates of the federal, cantonal and municipal income taxes are then applied. Since the cantonal and municipal income taxes are imposed on rental income, the total tax liability varies according to the location of the property.

Capital Gains

At the federal level, gains from the sale of private property are not taxable, and gains from the sale of business property are taxed as income. At the cantonal and municipal level, a real estate gains tax is imposed on the sale of both private and business property.

The rates for capital gains are usually progressive and the longer the property is owned, the lower the taxes. A shorter owning period would require a surcharge and both cantonal and municipal levels are applicable. The following are the cantonal rules for the disposal of immovable property:

• The standard rate is applicable after the holding period of four to five years. The top burden usually ranges from 25% to 50%.
• Tax is gradually reduced after exceeding the four to five years of ownership. The maximum relief allowed is 50% to 70% of the payable tax.
• A surcharge of up to 50% of the normal tax may be imposed on short term gains i.e. properties sold within the first four or five years.

Two systems are used to compute for taxable capital gains, the Zurich system and the St. Gallen System. The two systems are highly similar, since the computation for the taxable gains is selling price less acquisition costs and improvement costs for both systems. Their main difference lies in the computation for capital gains on business property. The Zurich system basically applies the same formula to business property as private property, and subjects recaptured depreciation to income tax, while the St. Gallen System subjects all capital gains from business and private property fully to income tax.

PROPERTY TAXATION

Wealth Taxes

Annual wealth taxes are levied at the cantonal level. Non-residents pay taxes on enterprise assets and real estate situated in Switzerland. The tax payable varies from canton to canton. The assets are valued at their market value. Personal debts, mortgages, bank loans and overdrafts are deductible, as well as certain personal deductions and allowances from the taxable base, depending on the canton.

Property Taxes

Many municipalities and some cantons impose real property taxes on real estate located in Switzerland. The rates usually range from 0.05% to 0.3%, levied on the value of the property. The rates and the coefficient vary from canton to canton.

CORPORATE TAXATION

INCOME TAX

Corporate income is taxable at the federal, cantonal and municipal levels. Federal income tax is imposed at a flat rate of 8.5%. The cantonal income tax rates, as well as the municipal rates, vary depending on the canton and municipality the company is liable to pay taxes in.

Capital Gains Tax

Capital gains on the sale of real estate property are taxable at the federal and cantonal levels. At the federal level, the gains are generally included in the taxable income. At the cantonal level, cantons use either the Zurich system or the St. Gallen System. Under the Zurich system, a separate real estate gains tax is levied on capital gains, while under the St. Gallen System, capital gains are included in corporate income tax.

Switzerland - more data and information

• Guide to buying houses and registering property sales in Switzerland

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