The Switzerland tax rate may not be top-of-mind in the initial surge of excitement around moving. However, questions inevitably bubble to the fore when the move is considered from a financial planning perspective.
For an American living in Switzerland, there will be many new taxes to get familiar with. But, their functions will feel familiar. For example, you’ll read about Swiss cantonal taxes and municipality taxes (among others) in this piece, and learn that they roughly map onto local and city taxes of the sort you’d pay when living back in the US.
While tax in Switzerland has somewhat of a mysterious aura due to the country’s deep ties to the international banking and finance sectors, the country holds endless appeal for expats seeking a move to an exciting and (with the right strategy) tax-efficient place to live.
Becoming a Swiss tax resident
In contrast to many of the European countries it borders, Switzerland is known as an extremely efficient place.
For example, when you first move to Switzerland, you will register at your local municipality (commune/Gemeinde) in your canton of residence. (1) This must be done within 14 days of arriving and before you begin working. If you are registering yourself as an individual, this process also activates your Swiss tax residency.
Additionally, Swiss health insurance is compulsory and must be purchased within three months of your arrival in Switzerland.
Not all residents in Switzerland must file a tax return
Many foreign nationals pay taxes directly on a pay-as-you-earn (PAYE) basis (also known as “Quellensteuer”).
The tax filing threshold for Quellensteuer is 120,000 CHF (around 130,000 USD).
Typically, a foreign national will not need to file a Swiss tax return if they:
- fulfill the criteria and
- do not meet the wealth threshold established by their canton.
Important callout: The above does not apply to Permit C holders in Switzerland. If you reside in Switzerland on a Permit C, you must file an annual Swiss tax return.
The tax authority in Switzerland
The Federal Tax Administration is the federal tax authority in Switzerland, however, there are also 26 cantons in the country that each have their own taxes, too.
For US expats, the cantons are akin to states. Similarly to how you must file a federal tax return every year, in most cases, a state tax return is also due.
In Switzerland, there are other types of taxes to consider too, including municipal, wealth, and church.
Are taxes in Switzerland high?
All Swiss tax residents are subject to tax on their worldwide income, but non-residents are only taxed on their Swiss-derived income. Additionally, a double taxation agreement, Totalization Agreement, and estate tax treaty also exist between Switzerland and the US.
Interestingly, Switzerland may be considered a slightly better place for a single U.S. person to live and pay taxes, while for a dual-income household with two children, there may be virtually no tax difference, broadly speaking. (2)
Switzerland uses a progressive tax system
This means that the amount taxpayers owe depends on their income; the more you earn, the more you’re taxed.
As mentioned, Switzerland levies many different types of taxes. Taxes are collected by the cantons (3), which can loosely be equated to the state that you live in. When the Swiss tax season opens, your canton’s tax administration office will send you your tax return to complete.
The total amount of tax levied per individual can vary enormously because it’s subject to both their earned and investment income and where they live in Switzerland.
Additionally, Switzerland handles its wealth tax in a unique way that does not apply capital gains tax to investment income. (This also varies by canton.)
Tax residents of Geneva have the highest cantonal tax rates in the country. However, it’s worth noting that some municipalities have taxes exceeding even the highest cantonal tax. (4)
For a comprehensive breakdown of tax brackets in Switzerland, PWC provides a detailed overview of the Switzerland tax rates associated with each filing status. (5)
VAT in Switzerland
Switzerland charges Value Added Tax (VAT) on goods and services. Additionally, if you are a business owner and revenue exceeds CHF100,000 (around 100,000 USD) per year, you must register for VAT.
In 2024, the standard VAT tax rate in Switzerland is 8.1%, though there are certain categories that qualify for a reduced rate (2.6%). The accommodation VAT rate is is 3.8%. (6)
Lump-sum taxation for certain foreign nationals in Switzerland
Lump-sum taxation is also known as expenditure-based taxation. (7) It is a simplified assessment procedure for foreign nationals who are domiciled in Switzerland but are not gainfully employed in the country.
It’s worth mentioning that lump-sum taxation is not the same as lump-sum payout tax, which is generally available throughout Switzerland and is a powerful planning tool. (8)
The appeal of expenditure-based taxation lies in that it provides for a special way of assessing income and wealth, although the regular tax rates are applied in calculating the tax amount.
Today, this form of taxation is available to qualifying foreign nationals who:
- reside in the cantons of Thurgau, St Gallen, Lucerne, or Bern,
- make Switzerland their tax domicile for the first time or after at least ten years spent outside the country, and
- are not gainfully employed in Switzerland.
Note: Fewer than 0.1% of taxpayers are taxed on an expenditure basis in Switzerland. (9) The right to expenditure-based taxation expires when a person acquires Swiss citizenship or becomes gainfully employed in Switzerland.
US-Switzerland Tax Treaty
Unlike the vast majority of countries, the US tax system is citizenship-based. This means that both US citizens and permanent residents must file a yearly tax return with the IRS, even if they reside abroad (e.g., Switzerland).
Most Americans living in Switzerland will need to file two tax returns. The first tax return you file will typically be with your cantonal tax administration. The second one filed is with the American Internal Revenue Service (IRS). When filing with the IRS, you will need to apply the appropriate credits and exclusions, as well as file the correct administrative forms (e.g., FBAR).
All this must be done while ensuring you are strategically aligned with the best approach given the US-Switzerland Tax Treaty. In many cases, consulting with experts in Swiss taxes and US expat taxes is beneficial.
Taxes in Switzerland vs USA
* Reference #10
*** IRS website
**** US Tax Planning for Expats
Wrapping up: Navigating taxes in Switzerland and the US
Taking time to dig in and research the financial implications of an international move will be key to feeling secure in your approach to Switzerland taxes.
As you’ve read, in many cases, Americans living in Switzerland may not even need to file. In others, it will be necessary to build an expat financial team to advise the best approach to tax and financial planning.
Taxes in Switzerland - FAQ
Is there a wealth tax in Switzerland?
Switzerland imposes a wealth tax at cantonal and municipal levels, but not the federal level. Wealth tax rates vary considerably, ranging from 0.1% to 1%.
Do foreigners pay taxes in Switzerland?
Yes, if they qualify as tax residents in Switzerland. Note that taxes are collected by the cantons, even federal ones. If you have a question about your particular situation, you will need to visit the tax office in your canton.
References
- Notifying a change of address at the register of the population / residents' registration office
- Income Tax in Switzerland Compared - moneyland.ch
- Taxes in Switzerland (ch.ch)
- Swiss Tax Rates by Canton
- Switzerland - Individual - Taxes on personal income (pwc.com)
- Increase in VAT rates from 2024 (admin.ch)
- Lump-sum taxation (admin.ch)
- Lump-sum payout tax: The seven key points | Credit Suisse Switzerland (credit-suisse.com)
- Taxpayers qualifying for Lump-Sum Taxation in Switzerland
- Local tax information for Switzerland
Additional resources
- Taxing Wages - Switzerland
- Falling wealth taxes contributing to rising wealth concentration – KOF Swiss Economic Institute | ETH Zurich
Meet the Author
Arielle Tucker is a Certified Financial Planner™ and IRS Enrolled Agent with Connected Financial Planning. She’s spent over a decade working with US expats on US tax and financial planning issues. She is passionate about working with US expats and their families to help secure their financial future reflective of their core values. Arielle grew up in New York and has lived throughout the US, Germany, and Switzerland.