Taxation Liability In Switzerland

The Swiss tax system - Global Eye Switzerland is one of the most complicated in the continent of Europe, based mostly on the fact that the country functions as a Federation.

The many cantons and municipalities in Switzerland can put in place their own taxes, in addition to the ones imposed on a national level, including property gains taxes, wealth taxes, and income tax.

In most cases, expats living and working in the country will also have to pay most of these taxes. By virtue of being a foreigner, you may be able to claim certain tax expenses and deductibles.

The determination of who needs to pay which kinds of taxes, and at which rate, takes places based on the circumstances of the individual.

Who Is Supposed To Pay Taxes

Unlimited Liability

People who are residents in Switzerland, whether on a temporary or permanent basis, are supposed to pay tax, and are subject to unlimited taxation liability.

This also applies to legal entities in the country, which means the income and assets held anywhere in the world are subject to taxes.

Limited Liability

Limited taxation liability applies to people not living in Switzerland, and companies that have economic relationships with the country. In these cases, the liability is limited in the sense that only the aspects of the income that is based in Switzerland is taxed.

Ordinarily, residence covers places where people live with the intent to settle on a permanent basis. Additionally, people can also be deemed residents when they settle in Switzerland for long periods, typically capped at 90 days when only living, and 30 days if working in the country, even when this employment is not gainful.

On the other hand, companies are considered resident in Switzerland if they have real administration or a registered office in the country.

Major Types Of Swiss Taxes

The country places income taxes on the personal income and wealth of residents, in addition to leveling indirect taxes in the form of the value added tax.

Apart from this, the cantons and municipalities in the country have authority to level several other types of taxes, of which inheritance and gift taxes are some.

While in comparison to many other countries, the tax rates are mediocre, expats and retirees looking to come to Switzerland should take a careful look at the differences between the different cantons, since certain locations can tax their residents much higher than others.

As a federation, cantons in Switzerland are given the status of states themselves, giving them special rights to levy their own taxes, except when that particular levy has been reserved for the centre.

Some of the taxes that can only be imposed by the Federation include the VAT, custom duty, stamp duty, and withholding tax.